— 


•USTQN  COLLEGE  SCHOOL 
BUSINESS  AOMIN 


J 


A  BRIEF  HISTORY  OF  PANICS 


AND  THEIR  PERIODICAL  OCCURRENCE 
IN  THE  UNITED  STATES 


BY 


CLEMENT  JUGLAR 

MEMBER  OF  THE  INSTITUTE,  VICE-PRESIDENT  OF  LA  SOCifiTfi 
D'fiCONOMIE  POLITIQUE 


THIRD  EDITION 

TRANSLATED  AND  EDITED  WITH  AN  INTRODUCTION  AND 
BROUGHT  DOWN  FROM  1889  TO  DATE 


BY 


DeCOURCY  W.  THOM 

FORMER  MEMBER  OF  THE  BALTIMORE  STOCK  EXCHANGE  AND  OF  THE 
CONSOLIDATED  EXCHANGE  OF  NEW  YORK 


G.  P.  PUTNAM’S  SONS 
NEW  YORK  AND  LONDON 
Gt>e  fmlcfterbocker  press 
1916 


Copyright,  1893,  by 
DeCOURCY  W.  THOM 


Copyright,  1916,  by 
DeCOURCY  W.  THOM 


Zb<  'fcnfcherbocfcer  Prcas,  Hew  Iflorft 


TO  GOLDEN  DAYS 


Tonight  at  “  Blakeford,”  I  set  down  this  dedication  of 
the  third  edition  of  this  book  which  has  proved  to  be  the 
pleasant  companion  of  two  visitations — one  at  “  Wakefield 
Manor,”  Rappahannock  County,  Virginia,  in  1891,  the  other 
at  my  old  home  “  Blakeford,”  Queen  Anne’s  County,  Mary¬ 
land,  in  1915.  The  memories  that  entwine  it  there  and  here 
mingle  in  perfect  keeping  and  have  made  of  a  dry  study  some¬ 
thing  that  stirs  anew  within  me  as  I  consider  the  work  ac¬ 
complished,  my  love  and  remembrance  of  the  old  days,  and  my 
love  and  unforgettingness  of  these  other  golden  days  under 
whose  spell  I  have  brought  the  book  up  to  the  present  year. 

“  Blakeford,” 

October  10,  1915. 


DeCourcy  W.  Thom. 


r 


PREFACE  TO  THIRD  EDITION 

The  second  edition  of  this  study  of 
Panics  in  the  United  States  brought  us 
through  the  year  1891.  I  originated  about 
one  fourth  of  it. 

This  third  edition  brings  us  practically 
up  to  date.  Of  this  edition  I  originated 
about  one  half.  I  hope  it  will  prove 
helpful  in  many  ways.  I  trust  that  it 
will  force  an  appreciable  number  of  men 
to  realize  that  “ business”  or  “financial” 
panic  is  not  merely  fear,  as  some  have 
asserted ;  but  is  based  upon  the  knowledge 
that  constriction,  oppression,  unhappy  and 
radical  change  in  this,  that,  or  the  other 
kind  of  business  must  tend  to  drag  down 
many  others  successively,  just  as  a  whole 
line  of  bricks  standing  on  end  and  a  few 
inches  apart  will  fall  if  an  end  one  is 
toppled  upon  its  next  neighbor.  Indeed, 
the  major  cause  of  “business”  or  “financial” 


Preface  to  Third  Edition 


panic  is  just  reasoning  upon  existing  con¬ 
ditions  rather  than  a  foolish  fear  of  them. 
Over-trading  and  loss  of  nerve  constitute 
the  medium.  Recent  national  legislation 
has  gone  far  in  enabling  the  business  world 
in  the  United  States  to  prevent  panics,  and 
farther  yet  in  providing  the  means  to  cope 
with  them  when,  in  spite  of  precautions, 
they  shall  recur. 


“Blakeford,” 
October  io,  1915. 


DeC.  W.  TnoM. 


A  BRIEF  HISTORY  OF  PANICS 


INTRODUCTION 


( 


Comprising  a  Condensation  of  the  Theory 
of  Panics,  by  M.  Juglar,  Rendered  into 
English,  with  Certain  Additional  Ma¬ 
terial,  by  DeCourcey  W.  Thom. 

In  this  translation,  made  with  the 
author’s  consent,  my  chief  object  being  to 
convey  his  entire  meaning,  I  have  unhesi¬ 
tatingly  rendered  the  French  very  freely 
sometimes,  and  again  very  literally.  Style 
has  thus  suffered  for  the  sake  of  clear¬ 
ness  and  brevity,  necessary  to  secure 
and  retain  the  attention  of  readers  of  this 
class  of  books.  This  same  conciseness  has 
also  been  imposed  on  our  author  by  the  in¬ 
herent  dryness  and  minuteness  of  his  faith¬ 
ful  inquiry  into  hundreds  of  figures,  tables 
showing  the  condition  of  banks  at  the  time 
of  various  panics,  etc.,  etc.,  essential  to  his 
demonstration.  As  an  extreme  instance  of 
the  latitude  I  have  sometimes  allowed  my- 

x 


2 


Introduction. 


self,  I  cite  my  rendering  of  the  title :  “  Des 
Crises  Commer dales  et  de  Leur  Retour 
Periodique  en  France ,  en  Angleterre  et  aux 
Fiats- Rnis  v  merely  as  “  Panics  and  Their 
Periodical  Occurrence  in  the  United  States”: 
for  M.  Juglar  himself  states  that  a  commer¬ 
cial  panic  is  always  a  financial  panic,  as  a 
falling  away  of  the  metallic  reserve  indi¬ 
cates  its  breaking  out;  and  I  have  only 
translated  that  portion  dealing  with  the 
United  States,  deeming  the  rest  unneces¬ 
sary,  for  this  amply  illustrates  and  proves 
the  theorem  in  hand. 

To  this  sketch  of  the  financial  history  of 
the  United  States  up  to  1889,  when  M. 
Juglar  published  his  second  edition,  I  have 
added  a  brief  account  to  date,  including 
the  panic  of  1890,  the  table  headed  a  Na¬ 
tional  Banks  of  the  United  States,”  and 
some  additions  to  the  other  tables  scattered 
through  this  book. 

From  the  prefaces  to  the  French  editions 
of  1860  and  of  1889,  and  other  introductory 
matter,  I  have  condensed  his  theory  as  fol¬ 
lows  : 

A  Crisis  or  Panic  may  be  defined  as  a 


Introduction . 


3 


stoppage  oi  the  rise  of  prices :  that  is  to 
say,  the  period  when  new  buyers  are  not 
to  be  found.  It  is  always  accompanied  by 
a  reactionary  movement  in  prices. 

A  panic  may  be  broadly  stated  as  due  to 
overtrading,  which  causes  general  business 
to  need  more  than  the  available  capital, 
thus  producing  general  lack  of  credit.  Its 
precipitating  causes  are  broadly  anything 
leading  to  overtrading : 

In  the  United  States  they  may  be  classed 
as  follows : 

i.  Panics  of  Circulation,  as  in  1857,  when 
the  steadily  increased  circulation,  which 
had  almost  doubled  in  nine  years,  had  ren¬ 
dered  it  very  easy  to  grant  excessive  dis¬ 
counts  and  loans,  which  had  thus  over- 
stimulated  business  so  that  the  above 
relapse  occurred  ;  or,  we  may  imagine  the 
converse  case,  leading  to  a  quicker  and 
even  greater  disaster:  a  sudden  and  pro¬ 
portionate  shrinkage  of  circulation,  which, 
of  course,  would  have  fatally  cut  down 
loans  and  discounts,  and  so  precipitated 
general  ruin. 


4 


Introduction . 


2.  A  Panic  of  Credit,  as  in  1866,  when  the 
failure  of  Overend,  Gurney,  &  Co.  rendered 
the  whole  business  world  over  cautious,  and 
led  to  a  universal  shrinkage  of  credit.  [I 
take  the  liberty  of  adding  that  it  seems 
evident  to  me  that  such  a  danger  must 
soon  confront  us  in  the  United  States,  un¬ 
less  our  Silver  Law  is  changed,  because  of 
a  finally  inevitable  distrust  of  the  govern¬ 
ment’s  ability  to  keep  67-cent  silver  dollars 
on  an  equality  with  100-cent  gold  dollars.] 

3.  Panics  of  Capital,  as  in  1847,  when 
capital  was  so  locked  up  in  internal  im¬ 
provements  as  to  prove  largely  useless. 

4.  General  Tariff  Changes.  To  the  three 

causes  given  above  the  translator  adds  a 
fourth  and  most  important  one :  Any 
change  in  our  tariff  laws  general  enough  to 
rise  to  the  dignity  of  a  new  tariff  has  with 
one  exception  in  our  history  precipitated  a 
panic.  This  exception  is  the  tariff  of  1846, 
which  was  for  revenue  only,  and  introduced 
after  long  notice  and  upon  a  graduated 
scale.  This  had  put  the  nation  at  large  in 
such  good  condition  that  when  the  appar- 


Introduction . 


5 


ently  inevitable  Decennial  Panic  occurred 
in  1848  recovery  from  it  was  very  speedy. 

The  reason  for  this  general  effect  of  new 
tariffs  is  obvious.  Usual  prices  and  confi¬ 
dence  are  so  disturbed  that  buyers  either 
hold  off,  keeping  their  money  available,  or 
else  draw  unusually  large  amounts  so  as  to 
buy  stock  before  adverse  tariff  changes, 
thus  tightening  money  in  both  ways  by  in¬ 
terfering  with  its  accustomed  circulation. 
This  tendency  towards  contraction  spreads 
and  induces  further  withdrawal  of  de¬ 
posits,  thus  requiring  the  banks  to  reduce 
their  loans ;  and  so  runs  on  and  on  to  in¬ 
creasing  discomfort  and  uneasiness  until 
panic  is  speedily  produced.  The  practical 
coincidence  and  significance  of  our  tariff 
changes  and  panics  is  shown  by  an  extract 
below  from  an  article  written  by  the  trans¬ 
lator  in  October-November,  1890,  predict¬ 
ing  the  recent  panic  which  was  hastened 
somewhat  by  the  Baring  collapse.1 

1  Inter-relations  of  Tariffs ,  Panics ,  and  the  Condition  of 
Agriculture ,  as  Developed  in  the  History  of  the  United  States 
of  America. 

This  brief  sketch  of  our  economic  history  in  the  United 
States  seeks  to  show  that  Protective  Tariffs  have  always  im- 


6 


Introduction. 


The  retarding  or  precipitating  influence 
of  a  good  or  bad  condition  of  agriculture 
upon  the  advent  of  a  panic  is  also  indicated. 

poverished  a  majority  of  our  people,  the  Agriculturists  ;  that 
agriculture  has  thus  been  made  a  most  unprofitable  vocation 
throughout  the  States,  and  that  this  unsoundness  at  the  very 
foundation  of  the  business  of  the  American  people  has  often 
forced  our  finances  into  such  makeshift  conditions,  that  under 
any  unusual  financial  strain  a  panic,  with  all  its  wretched 
accompaniments,  has  resulted. 

To  consider  this  properly,  we  must  note  the  well  known 
fact  that  in  this  land,  those  who  live  by  agriculture  directly, 
are  more  than  one  half  of  our  population.  Their  votes  can 
cause  to  be  made  such  laws  as  they  see  fit,  hence,  one  would 
expect  the  enactment  of  laws  to  raise  the  price  of  farm  pro¬ 
ducts,  and  to  lower  the  price  of  all  that  the  farmer  has  to  buy. 
But  the  farmers  vote  as  the  manufacturers  and  other  active 
classes  of  the  minority  of  our  voters  may  influence  ;  and  only 
twice  in  our  history,  from  1789  to  1808,  and  from  1846  to 
i860,  have  enough  of  the  minority  found  their  interests  suffi¬ 
ciently  identical  with  that  of  the  unorganized  farmer-majority 
to  join  votes,  and  thus  secure  at  once  their  common  end.  In 
consequence  of  this  coalition  during  these  two  periods,  two 
remarkable  things  happened :  1st,  agriculture  flourished, 
and  comfortable  living  was  more  widely  spread  :  2d,  panics 
were  very  infrequent,  and  the  hardships  and  far-reaching  dis¬ 
comforts  that  must  ever  attend  adjustments  to  new  financial 
conditions  after  disturbffnces  were,  of  course,  minimized. 

It  is  not  fair  to  deduce  very  much  from  the  first  period  of 
prosperity  among  the  farmers,  178910  1808,  for,  during  this 
time,  there  were  no  important  business  interests  unconnected 
with  agriculture  ;  but  we  may  summarize  the  facts  that  from  1 789 
to  1808,  there  was,  1st,  no  protection,  the  average  duty  during 
this  time  being  5  per  cent.,  and  that  laid  for  revenue  only  ;  2d, 
that  agriculture  flourished  ;  3d,  that  there  was  not  a  single  panic. 


Introduction. 


7 


The  symptoms  of  approaching  panic, 
generally  patent  to  every  one,  are  wonder¬ 
ful  prosperity  as  indicated  by  very  numer- 

“  The  Embargo  ”  of  1808,  followed  by  the  Non-Intercourse 
Act  in  1809  and  the  War  of  1812-15,  and  the  war  tariff,  by 
which  double  duties  were  charged  in  order  to  raise  money  for 
war  purposes,  caused  us  to  suffer  all  the  economic  disasters 
flowing  from  tariffs  ranging  between  absolute  protection,  and 
those  practically  prohibiting,  and  intensified  by  the  sufferings 
inseparable  from  war. 

During  this  period  agriculture,  for  the  first  time  in  our  his¬ 
tory,  was  in  a  miserable  condition.  It  is  significant  that  for 
the  first  time  too,  we  had  a  protective  tariff.  Though  our 
people  made  heroic  efforts  to  make  for  themselves  those  articles 
formerly  imported,  thus  starting  our  manufacturing  interests, 
they  had,  of  course,  lost  their  export  trade  and  its  profits. 
When  the  peace  of  1814  came,  we  again  began  exporting  our 
produce,  and  aided  by  the  short  harvests  abroad,  and  our  own 
accumulated  crops,  resumed  the  profitable  business  which  for 
six  years  our  farmers  and  our  people  generally  had  entirely  lost. 

Our  first  panic,  that  of  1814,  came  as  a  result  of  our  long 
exclusion  from  foreign  markets,  being  followed  by  the  stimu¬ 
lation  given  business  through  resumption  of  our  foreign  trade 
in  1814,  which  was  immensely  heightened  by  the  banks  issuing 
enormous  quantities  of  irredeemable  paper,  instead  of  bend¬ 
ing  all  their  energies  to  paying  off  the  paper  they  had  issued 
during  the  war. 

But  worse  than  the  suffering  entailed  by  this  panic,  was  the 
engrafting  upon  our  economic  policy  of  the  fallacious  theory 
made  possible  by  the  Embargo  and  the  Non-Intercourse  Act, 
(which  was  equivalent,  let  me  enforce  it  once  more,  to  that 
highest  protective  tariff,  a  prohibitory  one)  that  all  infant 
?nanufaciures  must  be  protected ,  that  is ,  guaranteed  a  home 
market ,  though  such  home  market  be  one  where  all  goods  cost 
more  to  the  purchaser  than  similar  goods  bought  elsewhere, 


8 


Introduction. 


ous  enterprises  and  schemes  of  all  sorts, 
by  a  rise  in  the  price  of  all  commodities, 
of  land,  of  houses,  etc.,  etc.,  by  an  active 

and  this  in  order  that  the  compact  little  band  of  sellers  in  the 
home  market  may  make  their  profit.  This  demand  for  pro¬ 
tection  was  made  by  those  who  had  started  manufactures  dur¬ 
ing  the  years  from  1808  to  the  end  of  the  war  of  1815,  when, 
as  we  have  seen,  imports  were  practically  excluded. 

In  1816  their  demand  met  explicit  assent,  for,  in  the  tariff  of 
that  year,  duty  for  protection,  not  for  revenue,  was  granted  ; 
and  an  average  of  25  per  cent,  duties  for  six  years,  to  be  fol¬ 
lowed  by  an  average  of  20  per  cent,  duties,  was  laid  upon 
imports.  For  a  few  years  bad  bread  crops  in  Europe,  demand 
for  our  cotton,  and  an  inflation  of  our  currency  delayed  a 
panic. 

But,  we  had  started  on  our  unreasoning  course.  We  had 
tried  to  ignore  the  laws  of  demand  and  supply,  and  had  for¬ 
gotten  that  it  is  also  artificial  to  attempt  preventing  purchases 
in  the  cheapest,  and  selling  in  the  highest  markets  ;  and  to 
help  a  few  manufacturers  we  had  put  up  prices  for  all  that  a 
large  majority  of  our  population, — the  agriculturists  mainly — 
had  to  buy.  In  a  short  while  the  demand  for  what  the 
farmers  had  to  sell  fell  away,  and  bills  could  not  be  met,  and 
their  troubles  were  added  to  those  of  the  minority  of  the  con¬ 
sumers  of  the  country  ;  the  volume  of  business  fell  off,  and  a 
panic  came  in  1818.  The  influences  that  led  up  to  it  con¬ 
tinued  until  1846,  as  follows  :  The  great  factors  in  producing 
this  state  of  affairs  were  the  successive  tariffs  of  1818,  with 
its  25  per  cent,  duty  upon  cottons  and  woollens,  and  its  in¬ 
creased  duties  on  all  forms  of  manufactured  iron,  (the  tariff  of 
1824  which  increased  duties  considerably),  and  the  tariff  of 
1828,  imposing  an  average  of  50  per  cent,  duties,  and  in  which 
the  protective  movement  reached  its  acme  (omitting,  of  course, 
the  present  McKinley  Bill  with  its  60  per  cent,  average  duty). 
In  1832,  consequently,  a  great  reaction  in  sentiment  took 


Introduction. 


9 


request  for  workmen,  a  rise  in  salaries,  a 
lowering  of  interest,  by  the  gullibility  of 
the  public,  by  a  general  taste  for  specu¬ 
lating  in  order  to  grow  rich  at  once,  by  a 
growing  luxury  leading  to  excessive  ex¬ 
penditures,  a  very  large  amount  of  discounts 
and  loans  and  bank  notes1  and  a  very  small 

place,  and  the  “  Compromise  Tariff”  was  passed  and  duties 
were  lowered.  From  this  period,  the  advocacy  of  a  high 
tariff  in  order  to  protect  “  Infant  Industries,”  no  longer  “In¬ 
fant”  was  largely  abandoned,  and  its  advocacy  was  generally 
based  upon  the  fallacy,  less  obvious  then  than  now,  of  secur¬ 
ing  high  wages  to  laborers  by  means  of  high  import  duties. 
This  plea  for  high  duties  the  laborer  found  to  be  fallacious. 

They  (agriculturists  mainly)  found  that  they  had  to  pay 
more  for  manufactured  goods,  so  that  the  manufacturers 
could  still  buy  their  raw  materials  at  the  advanced  prices,  pay 
themselves  the  accustomed  or  increased  profits,  and  then 
possibly  pay  the  laborer  a  small  advance  in  wages. 

The  advance  did  not  compensate  for  increased  cost  of  nec¬ 
essaries  of  life.  If  competition  reduced  the  manufacturers’ 
profit,  the  first  reduction  of  expenses  was  always  in  the 
laborer’s  pay.  The  recognition  of  these  truths  brought  about 
the  further  reduction  of  duties  until  1842,  in  which  year  the 
tariff  was  once  more  raised.  It  was  not  until  1846  that  we 
enjoyed  a  tariff  which  sought  to  eliminate  the  protective 
features.  It  is  significant  that  a  period  of  greater  profit  and 
stability  among  our  business  men,  but  especially  among  our 

1  Our  recent  banking  history  has  proved  rather  an  excep¬ 
tion  to  this  law  as  far  as  bank  notes  are  concerned,  because  of 
the  obviously  unusual  cause  of  sudden  and  enormous  calling 
in  of  government  bonds,  the  basis  of  bank-note  issue. 


IO 


Introduction 


reserve  in  specie  and  legal- tender  notes  and 
poor  and  decreasing  deposits. 

On  the  other  hand,  the  lowest  point  of 

farmers,  was  then  inaugurated.  This  was  the  first  tariff,  since 
that  of  1S16,  not  affected  by  politics.  It  lasted  until  1857, 
and  the  country  flourished  marvellously  under  it. 

From  1816,  when  protection  was  first  resorted  to,  until  to¬ 
day,  tariff  rates  have  been  almost  continually  raised,  mainly 
by  votes  of  the  agriculturists,  misled  by  the  manufacturers  and 
politicians,  influenced  by  the  manufacturers’  money.  And  a 
fact  worth  noting  is  that  financial  panics  have  come  quick 
and  furious.  They  came  in  1818,  and  in  1825-26,  in  1829-30, 
and  so  on,  (see  page  13).  Sudden  changes  in  our  tariff  rates 
have  unvaryingly  been  followed  by  financial  panics  within  a 
short  period.  Changes  to  lower  rates  have  not  brought  panics 
so  quickly  as  changes  in  the  reverse  direction. 

Low  tariff  without  protective  features,  maintained  steadily, 
has  been  coincident  with  constantly  increasing  prosperity  to 
the  country  at  large  :  but  most  especially  to  the  agriculturists. 
This  is  readily  understood,  for  purchases  of  imported  and  man¬ 
ufactured  goods  and  all  outfit  needed  for  the  farmers’  land 
and  family  can  be  made  at  low — and  owing  to  the  competition 
that  always  arises  to  supply  a  steady  and  natural  market — low¬ 
ering  prices.  Moreover,  the  settled  prices  prevailing  through¬ 
out  the  country  allow  of  assured  calculations  and  precautions 
as  to  business  ventures,  and  permit  such  a  ratio  to  be  es¬ 
tablished  between  expenses  and  income,  that  at  the  end  of  the 
fiscal  year  a  profit,  not  a  loss,  may  be  counted  upon. 

This  was  the  experience  of  our  agriculturists  during  the 
second  and  last  prosperous  time  of  our  farmers,  1846-60. 
During  that  period  agriculture  flourished  ;  the  tariff  was  low 
and  there  were  only  two  panics,  that  of  1848,  and  the  one  of 
1857,  and  the  first  (a  non-protective  one)  should  not  be  con¬ 
sidered  as  precipitated  by  the  tariff  of  1846,  except  that  some 
few  suffered  briefly  in  readjusting  themselves  to  the  changed, 


Introduction. 


II 


depression  following  a  panic  is  accom¬ 
panied  by  tbe  converse  of  the  symptoms 
just  enumerated.  >' 

(though  better), condition  of  the  new  tariff.  The  vast  majority 
of  the  nation  reaped  enormous  benefits  from  the  changes 
inaugurated. 

The  panic  of  1857  was  caused  by  over-activity  in  trade 
speculation,  and  over-banking,  and  the  tariff  of  the  same  year 
was  really  passed  to  help  avert  the  panic  threatening.  It  had 
the  contrary  effect,  it  is  believed,  for  it  still  further,  of  course, 
unsettled  rates  for  goods,  when  prices  were  already  unstable. 
But  the  point  is  to  be  noted  that  in  reality  tariff  change  fol¬ 
lowed  practical  panic  in  this  instance  rather  than  practical 
panic  tariff  change.  The  high  protective  war  tariffs,  begin¬ 
ning  in  i860,  and  increased  for  war  purposes  and  granted 
largely  as  an  offset  for  those  internal  revenue  taxes  laid  to 
carry  on  the  war,  have  been  continued  as  a  body  ever  since, 
as  is  well  known,  despite  the  internal  revenue  taxes  having 
been  abolished  except  on  whiskey  and  tobacco.  It  is  equally 
well  known  that  farming  has  grown  less  and  less  remunera¬ 
tive  since  i860,  and  that  the  panics  of  1864,  1873,  and  1884 
have  been  unfortunate  culminations  of  almost  unceasing 
financial  discomfort,  which  has  been  most  forcibly  exemplified 
during  the  last  two  months.  Even  now  the  financial  fabric  is 
in  unstable  equilibrium,  and  this  latest  monstrosity — the 
McKinley  Bill — imposing  the  highest  tariff  we  have  ever 
exacted — an  average  duty  of  60  per  cent.,  and  coming  when 
a  panic  was  due,  bids  fair  to  hurry  us  into  another  and  a  ter¬ 
rible  financial  panic.  If  it  does  not  do  so,  it  will  be  because 
our  crops  are  too  bountiful  to  allow  it,  but  it  will  at  least 
have  made  the  agriculturists  and  all  buyers  of  other  commo¬ 
dities  than  agricultural  produce  pay  more  for  all  purchases. 
It  will  bring  no  more  money  into  their  pockets,  but  it  must 
take  out  considerably  more.  The  people  appreciate  this.  The 
nation’s  pocket  nerve  has  been  touched.  This  is  the  meaning 


12 


Introduction 


Bank  balance  sheets  reflect  in  cold 
figures  the  result  of  the  above  influences. 
Prices  being  high,  and  discounts  and  loans 

of  the  recent  election,  it  seems  to  the  writer.  But  whether 
the  impending  danger  can  be  averted  even  if  a  prompt,  though 
wise  and  slow  reversal  of  tariff  policy  can  be  forced  by  the 
next  Congress  is  doubtful,  for  unrest  and  timidity  have  been 
evoked  and  require  time  to  be  allayed  before  easy  and  orderly 
business  operations  will  in  general  be  resumed,  unless  indeed 
bountiful  crops  here  and  demand  abroad  once  again  reverse 
the  logic  of  the  situation. 

Certain  it  is  that  our  tariff  laws  must  interfere  as  little  as 
possible  with  the  natural  law  of  demand  and  supply  in  mak¬ 
ing  prices,  or  we  must  be  content  to  suffer  from  the  instability 
that  artificiality  always  brings  with  it. 

Our  plain  duty  is  to  enact  as  speedily  as  possible  a  tariff  that 
shall  by  small  but  continued  changes  cut  down  our  protective 
duties  and  substitute  non-protective  duties  until  our  tariff  is 
for  revenue  only  ;  for  thus  and  thus  only  can  the  vast  majority 
of  the  agriculturists  buy  what  they  need  most  cheaply,  and  so 
find  that  to  purchase  necessaries  does  not  cost  them  more  than 
the  total  of  their  sales  ;  and  our  exports  of  produce,  chiefly 
owing  to  agricultural  prosperity,  would  increase,  thus  materi¬ 
ally  helping  to  build  up  our  general  business  so  that  the  other 
nations  will  have  to  pay  us,  in  the  gold  we  require  for  comfor¬ 
table  management  of  our  business,  the  growing  trade  balances 
against  them. 

The  rough  table  below  suggests  that  sudden  tariff  changes 
have  precipitated  panics,  which  have  come  quickly  if  the 
change  was  to  higher  protective  duties  and  somewhat  slower  if 
the  change  was  to  lower  protective  duties  ;  that  slow  and  well 
considered  changes  doing  away  with  protective  duties  gener¬ 
ally  have  not  caused  disturbances  ;  and  that  agriculture  has 
flourished  in  proportion  as  we  approached  tariff  for  revenue 
only.  It  has  for  obvious  reasons  required  about  one  year  for 


Introduction . 


13 


large  in  proportion  to  deposits,  and  hav¬ 
ing  steadily  increased  for  years,  danger 
is  near  ;  further,  when  discounts  and  loans 

financial  trouble  to  be  shown  by  decrease  in  value  of  farm 
produce  as  evinced  by  wheat-flour  exports. 

Special  conditions,  such  as  excessive  wheat  corps  here  and 
deficiency  abroad  or  special  tariff  favors  to  flour  export,  may 
even  increase  the  amount  exported  despite  an  otherwise  unto¬ 
ward  effect  of  the  new  tariff  upon  farmers.  I  have  selected 
flour  exports  as  the  article  best  reflecting  the  chief  interest  of 
the  farmers,  and  at  the  same  time  the  state  of  general  business 
for  manufacturing,  transportation  and  such  other  branches  as 
are  concerned  with  it. 


They  have 
all  been  de- 
Tar-  signedlyPro- 
iffs  .  J  tective  save 
the  one  o  f 


.1846. 


Panics. 


Condition  of  agriculture  and  inci¬ 
dentally  of  general  business  as 
suggested  by  export  of 
wheat-flour  from 
1790-1890. 


Year. 

Barrels. 

Dollars. 

1790. 

.  724,623 

4,591,293 

I791  • 

.  619,681 

3,408,246 

1792. 

.  824,464 

1793- 

.1,074,639 

1794. 

.  846,010 

1795* 

.  687,369 

. 

1796. 

.  725,194 

1797. 

•  515,633 

1798. 

•  567,558 

1799- 

.  519,265 

1800. 

.  653,056 

1801 . 

.1,102,444 

1802. 

.1,156,248 

1803. 

.i,3H,853 

9,310,000 

1804. 

.  810,008 

7,100,000 

1805. 

•  777,513 

8,325,000 

1806. 

.  782,724 

6,867,000 

Introduction . 


14 

are  not  only  large  in  proportion  to  deposits, 
having  increased  steadily  for  years,  and 
then  suddenly  fallen  off  noticeably  for  a 


Practical  exclu-") 
Say  sion  of  all  imports  ! 
1814  through  the  war  =  ( 
ProhibitoryTariff .  J 

l  Duties  for  six  ) 
i8i6-<  years  @  25%  and  V 
(  thereafter  @  20%.  ) 


1814 


I8l8 


1818- 


Duties  2556  on 
Cotton  and  Wool¬ 
lens,  and  all  duties  - 
on  Manufactured 
Iron  increased. 


1825-26 


1828]  s^verage  duty  °f 


1 


1833 


Compromise  Tar-' 
iff,  gradual  reduc¬ 
tion  of  duties  from 
50^  average  until 
in  1842  the  average  • 
was  20%.  But  this 
was  levied  for  Pro¬ 
tection  not  merely 
for  Revenue. 


1836-39 


_  j  Imposed  higher 

l8*a}dutier 


1807. 

.1,249,819 

10,753,000 

1808. 

.  263,813 

1,936,000 

1809. 

•  846,247 

5,944,000 

1810. 

•  798,431 

6,846,000 

1811 . 

.1,445,012 

14,662,000 

f 1812. 

.1,443,492 

13,687,000 

■8i3- 

.1,260,943 

13,591,000 

l8l4. 

•  193,274 

1,734,000 

.1815. 

.  862,739 

7,209,000 

j  l8l6. 

•  729,053 

7,712,000 

1  1817. 

.1,479,198 

17,751,376 

'l8l8. 

.1,157,697 

11,576,970 

I819. 

.  750,669 

6,005,280 

1820. 

.1,177,036 

5,296,664 

1821  . 

.1,056,119 

4,298,043 

1822. 

J 

.  827,865 

5,103,280 

1823. 

.  756,702 

4,962,373 

1824. 

.  996,792 

5,759,176 

1825. 

.  813,906 

4,212,127 

1826. 

.  857,820 

4,121,466 

1827. 

.  868,492 

4,420,081 

1828. 

.  860,809 

4,286,939 

1829. 

•  837,385 

5,793,651 

"  I83O. 

•1,227,434 

6,085,953 

I83I. 

.1,806,529 

9,938,458 

1832. 

.  864,919 

4,880,623 

'1833. 

•  955.768 

5,613,010 

1834. 

•  835,352 

4,520,781 

I835. 

•  779.396 

4,394,777 

I836. 

.  505,400 

3,572,599 

<  1837. 

.  318,719 

2,987,269 

I838. 

.  448,161 

3,603,299 

I839. 

•  923,151 

6,925,170 

I84O. 

.1,897,501 

10,143,615 

I84I. 

.1,515,817 

7,759,646 

' 1842. 

.1,283,602 

7.375,356 

,  I843. 

.  841,474 

3,763.073 

I844. 

.1,438,574 

6,759.488 

.1845. 

.1,195,230 

5,398,593 

Introduction. 


15 


1 


considerable  time,  only  to  increase  again, 
danger  is  imminent. 

On  the  other  hand,  a  steady  and  radical 


1846- 


Imposed  lower" 
duties  and  these 
were  not  for  Pro¬ 
tection  purposes  f 
they  were  simply  I 
for  Revenue.  J 


f  Reduced  Tariff] 
o  J  rates  on  above  plan  '■ 
57  |  because  of  redun-  , 
(.dant  prosperity.  j 
f  War  Tariff  pro-"] 

I  tection  restored  as  | 
1860-j  compensation  for  }- 
I  Internal  Revenue  j 
^  taxes.  j 


1862. .  As  above 

1864..  As  above 


1872  ■{ 

I 


1 


10%  reduction,  but 
coffee  and  tea  put 
on  Free  List  and 
whiskey  and  to¬ 
bacco  taxes  re¬ 
duced. 


{  above 


reduction  ) 
repealed,  j 


"1846. 

.2,289,476 

11,668,669 

1847. 

.4,382,496 

26,133,811 

1848. 

.2,119,393 

13,194,109 

1849. 

.2,108,013 

11,280,582 

1850. 

•1,385,448 

7,098,570 

1848 

< 

1851. 

•2,202,335 

10,524,331 

1852. 

•2,799,339 

11,869,143 

1853- 

.2,920,918 

14,783,394 

1854. 

.4,022,386 

27,701,444 

1855. 

.1,204,540 

10,896,908 

,1856. 

.3,510.626 

29,275,148 

1 

1857- 

•  3,712,053 

25,882,316 

1857 

•< 

1858. 

•  3,512,169 

19,328,884 

,1859- 

.2,431,824 

14,433,591 

i860. 

.2,611,596 

15,448,507 

1864 

1 

1861 . 

•4,323,756 

24,645,849 

1862. 

.4,882,033 

27,534,677 

1863. 

.4, 390,055 

28,366,069 

1864. 

•3,557,347 

25,588,249 

1865. 

.2,641,298 

27,507,084 

1866. 

.2,183,050 

18,396,686 

1867. 

.1,300,106 

12,803,775 

1868. 

.2,076,423 

20,887,798 

1869. 

•2,431,873 

18,813,865 

1870. 

•3,463,333 

21,169,593 

1871 . 

•3,653,841 

24,093,184 

f 1872. 

•2,514,535 

17,955,684 

1873 

1873- 

.2,562,086 

19,381,664 

1874. 

.4,094,094 

29,258,094 

1875- 

•3,973,128 

23,712,440 

1876. 

•3,935,512 

24,433,470 

1877. 

.3,343,665 

21,663,947 

1878. 

•3,947,333 

25,095,721 

1879. 

.5,629,714 

29,567,713 

1880. 

.6,011,419 

35,333,197 

1881 . 

.7,945,786 

45,047,257 

_ 1882. 

•  5>9i5,686 

36,375,055 

1 6 


Introduction . 


reduction  of  loans  and  discounts,  following 
a  panic  and  extending  until  new  enter¬ 
prises  are  very  scarce,  till  prices  are  very 
low,  till  there  is  wide-spread  idleness 
among  workmen,  a  decrease  in  salaries  and 
in  interest  rates,  when  the  public  is  wary 
and  speculation  dead,  and  expenditures 
are  cut  down  as  far  as  possible,  may  be 
taken  to  mean  a  rapid  and  continued  re¬ 
sumption  of  every  prosperous  business  :  but 
if  the  above  process  is  only  partially  per¬ 
formed,  renewed  trouble  must  result ; — in 
other  words,  liquidation  to  really  be  helpful 
(to  congested  business)  must  be  thorough. 

A  study  of  the  first  of  the  following 
tables,  “  National  Banks  of  the  United 
States,”  illustrates  the  above  generaliza¬ 
tion.  It  is  unnecessary  to  mention  that 
1873,  1884,  and  1890  have  been  the 


Duties  really 
raised  on  class  of 
goods  most  used, 
but  apparently 
1883-1  lowered  the  tariff, 
for  it  considerably 
reduced  rates  on 
many  little  used 
classes  of  goods. 

(  McKinley  Bill) 
1890 <  average  of  60%  > 
f  duty.  ) 


1884 


1890 


'1883.  .9,205,664  54,824,459 
1884.  .9,152,260  51,139,695 
1885.10,648,145  52,146,336 
-  1886. .8,179,241  38,442,955 
1887.11,518,449  51,950,082 
1888.11,963,574  54.777,710 
,1889. .9,374,803  45,296,485 

(  1890.12,231,711  57,036,168 
(  1891.11,344,304  54,705,616 


1893-4 


1897 


r  Free  silver  and 
sudden  ill-distrib- 
„  uted  and  drastic 
l  tariff  reductions 
and  insufficient 
c  revenue. 


1903 


< 


1907 


Tariff  disturb¬ 
ance  to  higher 
rates.  The  pro- 
paganda  for 
keener  regulation 
of  business. 


1913 


Tariff  reduc¬ 
tions  to  produce 
a  revenue;  not  on 
a  protective  basis. 
The  further  re- 
gulating  of 
business. 

The  “World 
War.” 


1892 . 

•15.196,769 

75,362,283 

!  i893- 

.16,620,339 

75,494,347 

V 1 894 • 

•16,859,533 

69,271,770 

1  1895. 

.  15,268,892 

51,651,928 

J  1896. 

.14,620,864 

52,025,217 

•N  I897. 

.14,569.545 

55,914,347 

I898. 

•15,349,943 

69,263,718 

I899. 

.18,485,690 

73,093,870 

1900. 

.18,699,194 

67,760,886 

1901  . 

.18,650,979 

69,459,296 

1902. 

•17,759,203 

65,661,974 

1903. 

.19,716,484 

73,756,404 

1904. 

.16,699,432 

68,894,836 

>1905. 

•  8,826,335 

40,176,136 

1906. 

.13,919,048 

59,106,869 

1907. 

.15,584,667 

62,175,397 

1908. 

.13,937,247 

64,170,508 

I9O9. 

.  IO,52I,l6l 

51,157,366 

1910. 

.  9,040,987 

47,621,467 

I9II  . 

.10,129,435 

49,386,946 

1912. 

.11,006,487 

50,999,797 

1913. 

.11,394,805 

53,171,537 

1914. 

.12,768,073 

62,391,503 

fe  .  f 


,  !:1  .  .  * 

i..-Mi,i  f 


•  ^s^fd  3>  •'  *  .mm  l'j 

.  *.%«  ti  i  in i  .  "T^!LE 


'I-***  4-“  1  ;r  J  -f  Tr  • 

I*  1 

Usow" 


TABLE  NO.  i.— NATIONAL  BANKS  OF  THE  UNITED  STATES. 


Introduction 


17 


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These  figures  are  for  the  standing  at  the  first  part  of  the  year  as  indicated. 


TABLE  NO.  i.— NATIONAL  BANKS  OF  THE  UNITED  STATES. — Continued. 


18 


Introdiiction 


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•IMIIIIMWII  —  MMMIIIIMMMMMMIIMMM 

TABLE  No.  2. 

United  States  Table  of  Balance  Sheets. 

MILLIONS  OF  DOLLARS. 


CIRCU- 

SPECIE 

DIS- 

INDI 

NUMBER 

YEAR 

LA- 

ON 

COUNTS 

AND 

VIOUAL 

OF 

CAPITAL 

TlON 

HAND 

LOANS 

DEPOSITS 

BANKS 

1611 

28 

IS 

£9 

52 

1815  * 

45  \ 

!7  \ 

208 1 

68  1  | 

1816  * 

68  \ 

IS  \ 

246  \ 

89 

1819 

35  \ 

9  \ 

73 

72 

1820  * 

*4  \ 

19  \ 

35 

308  \ 

J37  1 

1830 

6/  \ 

22  \ 

200  1 

S5  1 

330  \ 

745  1 

1834 

94  \ 

\ 

1 

1 

1835 

103  \ 

43  \ 

324 

75  ' 

506  \ 

200  1 

1836 

140  \ 

40  / 

365  1 

83 
//  < 

704  1 

23/  \ 

1837 

149  \ 

37  / 

457  1 

127 

7/3 

25/  \ 

1838 

H6  / 

35  / 

525 

465 

492 

84 

90 

788 

829 

840 

901 

290  I 
3/7 

327  \ 

1839  * 

135  / 

45  X 

1840 

/Ob  / 

33  / 

462  / 

75 

358 

1841 

107  / 

34  / 

386  / 

64  i 

784  / 

3/3  / 

1842 

33  / 

323  / 

62  1 

692  / 

i843 

\sa  1 

33  \ 

254  / 

56 

69/  / 

228  / 

1844 

\7S  \ 

49  \ 

264  \ 

8- f-  \ 

696 

1845 

\Q9  \ 

44  \ 

286  \ 

88  \ 

707 

206  1 

1846 

\/05  \ 

42  \ 

96 

707 

/96  / 

1847 

\l°5  \ 

35  \ 

3/0  \ 

9/ 

7/5 

203  1 

1848  * 

\l28  \ 

46  \ 

344  \ 

103 

75/ 

204  1 

1849 

U4  / 

43  X 

332  X 

9/  y 

782 

207  \ 

1850 

13/  / 

45  \ 

364\ 

/09  \ 

824 

2/7  \ 

1851 

155  \ 

46  \ 

4/3  \ 

128  \ 

879 

227 

1854 

204  \ 

59  \ 

557  \ 

188  \ 

/208 

30/  1 

1855 

136  \ 

53  \ 

576  \ 

190  1 

/ 307 

332  1 

1856  !95  \ 

59 

634  \ 

2/2  \ 

1398 

343  1 

1857  * 

2/4  \ 

58  / 

684  \ 

230  \ 

/4/b 

3  70  1 

1858 

155  / 

74  \ 

583  / 

185  / 

/422 

394  1 

1859 

193  \ 

104  \ 

657\ 

259  \ 

7476 

40/  1 

I860 

207  \ 

63  / 

691  \ 

253  \ 

/562 

42/ 

1861 

202  \ 

67  \ 

696  \ 

257  \ 

760/ 

429  1 

1862 

133  \ 

102  \ 

646 

29b  \ 

7492 

4/3 

1863  * 

23d  \ 

101 

643 

3  93  \ 

7466 

405 

*  PAN  1C 

YEARS 

TABLE  No.  3. 

United  States  Table  of  Balance  Sheets  of  the  National 
Banks— Quarterly  Statement. 


MILLIONS  OF  DOLLARS. 


TABLE  No.  4  ( A ro.  j  continued). 

MILLIONS  OF  DOLLARS. 


TABLE  No.  6  (No.  3  continued). 

MILLIONS  OF  DOLLARS. 


4 


Introduction . 


19 


last  three  panic  years.  But  it  is  very 
necessary  in  studying  this  table,  to  bear  in 
mind  that  its  figures  are  taken  from  the 
standing  of  the  banks  at  the  first  of  the 
year,  while  the  panics  generally  occurred 
later  in  the  year  :  the  last  two,  for  instance 
in  the  second  and  fourth  quarter,  respec¬ 
tively.  The  third  and  fourth  tables  will 
give  more  exact  figures  in  this  connection. 
Table  Two,  dealing  wdth  State  Banks,  is 
given  merely  to  round  out  our  banking 
history  as  told  in  figures. 

The  increase  or  diminution  of  deposits 
of  course  reflects  a  confident  and  success¬ 
ful,  or  a  panicky  and  impoverishing,  state 
of  general  business. 

The  adage  “  buy  cheap  and  sell  dear,” 
or  its  practical  equivalent — so  scary  and 
imitative  are  investors — Buy  during  the 
last  of  a  selling  movement  and  sell  during 
the  last  of  a  buying  movement ,  resolves  it¬ 
self,  we  venture  to  repeat,  into  :  Buy  when 
the  decline  caused  by  a  panic  has  produced 
such  liquidation  that  discounts  and  loans , 
after  steady  and  long -continued  diminu¬ 
tion ,  either  become  stationary  for  a  period , 


20 


Introduction. 


or  else  increase  'progressively  coincident 
with  a  steady  increase  in  available  funds  / 
and  sell  for  converse  reasons. 

These  conclusions  are  also  reached  by 
our  author  through  analyses  of  the  Finan¬ 
cial  History  of  England,  France,  Prussia, 
Austria,  etc.  These  I  omit  as  unnecessarily 
wearisome  to  the  reader  since  I  give  that 
of  our  own  country.  However,  I  will  here 
quote  the  following:  “What  must  be  noted 
is  the  reiteration  and  sequence  of  the  same 
points  ( faits )  under  varying  circumstances, 
at  all  times,  in  all  countries  and  under  all 
governments,”  and  also  this  table  showing 
all  the  panics  and  their  practical  coincidence 
in  the  past  eighty -five  years,  in 

Prance  England  and  the  United  States. 


1804 

1803 

18x0 

1810 

1813-14 

X8X5 

1814 

1818 

1818 

1818 

1825 

1825 

1826 

1830 

1830 

1829-31 

1836-39 

1836-39 

X837-39 

1847 

1847 

1848 

1857 

1857 

1857 

1864 

1864-66 

1864 

1873 

1873 

1882 

1882 

1884 

1889-90 

1890-91 

x 890-9 1 

1894 

£  1894 

1893-94 

1897 

5  1897 

1897 

1903 

g  1903 

•S  1907 

0  1913 

1903 

1907 

1907 

1913 

1913 

Introduction. 


21 


Truly  these  thirteen  panics  in  the  three 
countries  have  been  practically  simultane¬ 
ous  and  one  common  cause  must  have  orig¬ 
inated  them.  The  only  cause  common  to 
all  was  overtrading  to  such  an  extent  that 
neither  credit  nor  money  were  to  be  had, 
so  that  a  forced  liquidation  or  panic  inevit¬ 
ably  ensued. 

The  above  table  effectually  does  away 
with  the  theory  that  new  tariffs  are  directly 
productive  of  panics.  For  most  certainly 
new  tariffs  did  not  occur  in  England,  France, 
and  the  United  States  just  before  or  during 
all  the  panic  years  enumerated,  and  yet, 
practically  simultaneously  in  free-trade  Eng¬ 
land,  high-protection  France,  and  sometimes 
low-tariff,  sometimes  high-protection  United 
States  have  panics  occurred  for  eighty  years. 

But,  as  I  have  shown  in  a  note  attached 
to  this  Introduction,  a  new  tariff  or  a  gen¬ 
eral  change  of  duties  is  apt  to  precipitate  a 
panic,  on  account  of  the  unsettling  of  busi¬ 
ness,  and  that  the  consequent  shaking  of 
credit  adds  its  quota  to  the  forces  finally 
culminating  in  a  panic  cannot  be  doubted. 
As  a  matter  of  history  with  us,  substan- 


22 


Introduction . 


tially  new  tariffs  have  always  happened  to 
be  the  immediate  forerunners  of  a  panic, 
and  this  I  believe  to  be  true  in  the  case  of 
other  countries. 

Why  is  this  ?  Is  it  not  because  the  peo¬ 
ple  instinctively  turn  to  tinkering  at  and 
changing  their  chief  tax — the  tariff — when¬ 
ever  they  as  a  whole  need  financial  relief ; 
and  have  we  not  shown  that  such  relief  is 
needed  almost  every  ten  years,  when  the 
overtrading,  inseparable  from  the  develop¬ 
ment  of  all  thriving  communities  has  made 
the  call  for  credit  impossible  to  grant  ? 

A  new  tariff  may  defer,  or  hurry,  or, 
occurring  simultaneously,  will  intensify  a 
panic,  but  it  may  not  hope  to  avert  one 
when  due :  yet  if  its  changes  be  very  grad¬ 
ual,  fixed  and  long  predicted,  and  of  a  nature 
to  bring  about  or  confirm  a  judicious  tariff 
for  revenue  only,  they  will  materially  help 
to  put  business  on  so  firm  and  sound  a 
basis  that  recovery  from  the  inevitable,  and 
approximately  decennial  panics,  will  be 
wonderfully  expedited.  Thus  a  new  tariff 
is  a  quite  accurate  forewarning  of  a  panic, 
and  is  also  to  no  inconsiderable  extent  a 


Introduction . 


23 


contributory  cause.  (See  foot-note  on  page 
5,  seq.,  Interrelations  of  Panics ,  Tariffs, 
and  the  Condition  of  Agriculture,  etc. ; 
and  especially  what  is  said  of  the  panic  of 
1848,  on  page  10.) 

M.  Juglar  has  fully  analyzed  the  three 
phases  of  our  business  life  into  Prosperity, 
Panic,  and  Liquidation,  which  three  consti¬ 
tute  themselves  into  the  business  cycle, 
that  for  forty  years  past  (that  is,  since 
the  present  Bank  of  England  Act,  and  prac¬ 
tically  since  that  of  the  Law  governing  the 
Bank  of  France,  both  of  which  then  in¬ 
creased  the  required  specie  reserve)  has 
been  of  about  ten  years.  These  ten  years 
may  be  apportioned  roughly  as  follows : 
say,  Prosperity  for  five  to  seven  years; 
Panic  a  few  months  to  a  few  years,1  and 
Liquidation  about  a  few  years. 

I  have  already  pointed  out  the  signs  of 
prosperity,  of  panic,  and  of  liquidation,  but 
in  view  of  existing  conditions  perhaps  it 

1  The  panic  after  1873  is  the  only  one  I  know  extending  to 
anything  like  the  length  it  attained.  This  may  be  ascribed 
to  the  immense  development  and  consequent  speculation,  and 
to  the  inflation  of  the  currency  coming  after  the  period  about 
the  Civil  War. 


24 


Introduction . 


may  be  well  to  restate  here  the  quite  famil¬ 
iar  fact  that  the  completion  of  liquidation 
that  precedes  the  beginning  of  another 
period  of  prosperity  is  characterized  by 
lack  of  business,  steady  prices,  and  a 
marked  growth  in  available  banking  funds. 

[The  various  tables  spread  through  this 
pamphlet  are  fully  explained  by  their  head¬ 
ings  and  the  text.] 

In  conclusion  I  wish  to  express  my  thanks 
for  the  courtesy  M.  Juglar  has  extended 
me,  and  to  state  my  appreciation  of  the  mo¬ 
tives,  painstaking  patience,  and  undoubted 
originality  he  has  shown  in  explaining  and 
executing  so  faithfully  and  with  such  genius 
a  most  laborious  and  yet  spirited  work.  It 
is  only  justice  that  such  an  achievement 
should  have  been  awarded  a  prize  by  the 
French  Institute  (Academy  of  Moral  and 
Political  Sciences)  and  have  gained  for  M. 
Juglar  the  Vice-Presidency  of  the  “  Society 
for  the  Study  of  Political  Economy.” 

DeCourcy  W.  Thom. 

Wakefield  Manor. 


A  HISTORY  OF  PANICS  IN  THE 

UNITED  STATES  CONSIDERED 
WITH  SPECIAL  REFERENCE 
TO  AMERICAN  BANKS. 

The  English  Colonies  soon  after  their 
settlement  issued  paper  money.  The  first 
was  Massachusetts,  which  issued  it  even 
before  her  independence,  in  1690,  to  obtain 
funds  in  order  to  besiege  Quebec. 

This  example  was  followed  to  such  an 
extent  that  it  caused  a  marked  speculation 
in  favor  of  hard  money,  varying  according 
to  the  quantity  of  notes  in  circulation.  In 
1745,  after  a  successful  campaign  against 
Louisburg  and  the  taking  of  that  fortress, 
two  million  pounds  of  paper  money  were 
issued,  which  step  decreased  its  value. 
When  liquidation  occurred  these  paper 
pounds  were  not  worth  10  per  cent,  of 
their  face  value. 

The  War  of  Independence  obliged  Con¬ 
gress  to  issue  three  million  of  paper  dollars. 

25 


26 


A  Brief  History  of 


This  amount  increased  to  $160,000,000,  so 
that  Congress  declared,  in  1779,  that  it 
would  not  issue  more  than  $200,000,000. 
Notwithstanding  this  guaranty,  notwith¬ 
standing  the  forced  and  legal  rating  con¬ 
ferred  by  this  enactment,  notwithstanding 
the  war  spirit,  it  depreciated;  and  in  1779 
it  was  necessary  to  decree  that,  disregard¬ 
ing  its  normal  value,  it  should  be  taken  at 
its  face.  In  1780  it  was  no  longer  taken 
for  customs  dues.  In  1781  it  had  no  rating 
and  was  not  even  taken  at  1  per  cent,  of 
its  face  value. 

Between  1776  and  1780  the  issue  of 
paper  money  increased  to  $859,000,000. 

Bank  of  North  America. — In  1781  Mr. 
Morris,  Treasurer,  persuaded  Congress  to 
form  a  bank  (the  Bank  of  North  America) 
with  a  capital  of  $10,000,000,  of  which 
$400,000  should  be  turned  over  to  help 
the  national  finances.  The  capital  was  too 
insignificant  and  the  course  of  politics  too 
unpropitious  to  accomplish  this  end.  How¬ 
ever,  the  example  encouraged  the  States  to 
take  up  their  paper  money.  Upon  the 
adoption  of  the  U nited  States  Constitution 


Panics  in  the  United  States .  27 

the  issuing  of  paper  money  ceased,  and 
gold  and  silver  were  the  only  means  of 
circulation.  Thence  arose  great  embarrass¬ 
ment  for  the  Bank  of  North  America, 
which,  hampered  by  its  loans  to  the  Gover- 
ment,  increased  its  note  circulation  to  an 
enormous  proportion.  The  ebb  of  paper 
through  every  channel  finally  aroused  the 
public  fears,  and  people  refused  the  notes. 
Every  one  struggled  to  obtain  metallic 
money,  hence  it  became  impossible  to  bor¬ 
row,  and  bankruptcy  followed.  Such  was 
the  excitement  that  the  Philadelphians  as 
a  body  demanded  and  obtained  from  the 
Assembly  of  Representatives  a  withdrawal 
of  the  charter ;  but  the  Bank,  relying 
upon  Congress,  continued  until  March  17, 
1787 ;  succeeded  even  in  extending  its 
charter  fourteen  years  ;  and  later  obtained 
a  second  extension,  limited,  however,  to 
Pennsylvania. 

The  difficulty  experienced  in  the  manu¬ 
facture  of  money  led  Mr.  Hamilton,  Secre¬ 
tary  of  the  Treasury,  to  propose  to  Con¬ 
gress  in  1790  the  founding  of  a  National 
Bank.  After  some  doubts  as  to  the  power 


28 


A  Brief  History  of 


of  Congress,  it  was  authorized.  It  began 
operations  in  1794,  under  the  title  of 
“  Bank  of  the  United  States,’1  with  a  capital 
of  ten  millions,  eight  millions  being  sub¬ 
scribed  by  private  individuals,  and  two 
millions  by  the  Government.  Two  millions 
of  the  first  sum  were  to  be  paid  in  metallic 
money,  and  six  millions  in  6  per  cent.  State 
bonds ;  the  charter  was  to  run  till  March 
4,  1811.  It  seemed  to  be  a  good  thing  for 
the  public  and  the  stockholders,  for  during 
twenty-one  years  it  paid  an  average  of  8 
per  cent,  dividends.  In  1819  the  question 
of  renewing  its  privileges  came  up,  the 
situation  being  as  follows : 

ASSETS.  LIABILITIES. 

6  per  cent.  Capital 

Paper....  $  2,230,000  Stock. ..  .$10,000,000 
Loans  and 

Discounts.  15,000,000  Deposits .  8,500,000 

Cash .  10,000,000  Circulation...  4,500,000 

The  profits  from  the  Bank,  the  pros¬ 
perous  state  of  the  country,  and  the  in¬ 
crease  of  productions  led  people  to  think 
that  the  issuing  of  paper  money  caused  it 
all ;  seduced  by  this  alluring  theory  the 


Panics  in  the  United  States.  29 

“  Farmers’  Bank  ”  was  founded  in  Lancaster 
in  1810,  with  a  capital  of  $300,000.  Others 
followed;  such  was  the  mania  that  the 
Pennsylvania  Legislature  was  forced  to 
forbid  every  corporation  to  issue  notes. 
Despite  this  preventive  message  the  excite¬ 
ment  rose  so  high  that  companies,  formed 
to  build  harbors  and  canals,  also  put  notes 
into  circulation ;  in  this  way  the  law  was 
eluded. 

From  1782  to  1812  the  capital  of  the 
banks  rose  to  $77,258,000 ;  upon  the  1st 
of  January,  1811,  there  were  already  eighty  - 
eight  banks  in  existence.  Until  the  declara¬ 
tion  of  war  (June,  181 2), the  issuing  of  notes 
was  always  made  with  the  intention  of 
redeeming  them,  but  the  over-issue  soon 
became  general,  and  depreciation  followed. 
The  periodical  demands  for  dollar-pieces 
for  the  East  Indian  and  Chinese  trade  were 
warnings  of  the  over-speculations  on  the 
part  of  those  companies  whose  members 
were  not  personally  liable.  Traders,  who 
through  their  notes  or  their  deposits  had 
a  right  to  credit  with  the  banks,  did 
not  hesitate  to  ask  for  $100,000,  where- 


30 


A  Brief  History  of 


as,  formerly  they  would  have  hesitated  to 
ask  for  $1,000.  The  war  put  a  stop  to  the 
exportation  of  precious  metals,  which,  in 
the  ordinary  course  of  things,  limits  the 
issue  and  circulation  of  paper.  The  upshot 
of  this  was  to  redouble  the  note  issue, 
each  one  believing  its  only  duty  was  to  get 
the  largest  amount  into  circulation.  Loans, 
and  enormous  sums  of  money,  were  distri¬ 
buted  above  all  reason  among  individuals 
and  among  the  States.  The  increase  of 
dividends  and  the  ease  of  obtaining  them 
extended  the  spirit  of  speculation  in  certain 
districts,  and  especially  among  those  who 
owned  land.  The  remarkable  results  shown 
by  the  Bank  of  Lancaster,  the  “Farmers’ 
Bank,”  which, by  means  of  an  extraordinary 
issue  of  notes,  had  yielded  as  much  as  12 
per  cent,  and  piled  up  in  capital  twice  the 
amount  of  its  stock,  caused  it  to  be  no 
longer  thought  of  as  a  bank  intended  to 
assist  trade  with  available  capital,  but  as  a 
mint  destined  to  coin  money  for  all  owning 
nothing  at  all.  Led  by  this  error,  laborers, 
shopkeepers,  manufacturers,  and  merchants 
betook  themselves  to  quitting  active  oc- 


Panics  in  the  United  States .  3 1 

cupations  to  indulge  in  golden  dreams. 
Fear  alone  restrained  some  stockholders 
connected  with  the  non-authorized  com¬ 
panies,  and  led  them  to  seek  for  a  legal 
incorporation. 

In  Pennsylvania,  during  the  session  of 
1812,  an  act  was  passed  authorizing  twenty- 
five  banks,  with  a  capital  of  $9,000,000. 
The  Executive  nevertheless  refused  to 
ratify  it,  and  returned  it  with  some  very 
well-deserved  comments.  In  a  second  de¬ 
bate  the  first  resolution  was  rescinded  by  a 
vote  of  40  to  38.  In  the  following  session 
the  proposition  was  renewed  with  more 
vigor,  and  forty-one  banks  with  a  capital 
of  $17,000,000  were  authorized  by  a  large 
majority ;  the  representations  of  the  Execu¬ 
tive  proved  useless,  and  they  immediately 
entered  upon  their  duties  with  an  insuffi¬ 
cient  capital. 

To  discount  their  own  stock  was  a  soon- 
discovered  method.  They  thus  increased 
the  amount  of  notes,  which  depreciated  in 
comparison  with  hard  money,  and  dissipa¬ 
ted  on  all  hands  the  hope  of  exchanging 
with  it. 


32 


A  Brief  History  of 


In  the  absence  of  a  demand  from  abroad 
for  hard  money,  the  demand  came  from 
within  our  own  borders. 

The  laws  of  New  England,  which  were 
very  severe  upon  the  banks,  had  placed  a 
penalty  of  12  per  cent,  upon  the  annual 
interest  payments  of  those  persons  who  did 
not  pay  their  notes.  The  natural  result 
was  a  difference  of  value  between  New 
England  and  Pennsylvania,  which  meas- 
ured  the  depreciation  caused  by  paper  in 
the  latter  district.  As  remittances  on  New 
England  could  only  be  made  in  hard 
money,  the  equilibrium  of  the  banks  was 
disturbed  ;  they  were  not  able  to  respond 
to  the  demands  for  redemption,  and  a  sus¬ 
pension  of  payments  by  the  banks  of  the 
United  States,  except  those  of  New  Eng¬ 
land,  took  place  in  August  and  September, 
1814. 

The  Panic  of  1814. — An  agreement  took 
place  at  Philadelphia  between  the  bank 
and  the  chief  houses  allied  with  it  to  re¬ 
sume  payments  at  the  end  of  the  war. 

Unhappily,  the  public  did  not  demand 
the  accomplishment  of  this  promise  at  the 


Panics  in  the  United  States .  33 

time  fixed,  and  the  banks,  led  on  by  the 
thirst  of  gain,  issued  an  unprecedented 
amount  of  bank  notes.  The  general  ap¬ 
probation  brought  about  a  still  further  in¬ 
crease  in  their  number :  the  bank  notes  of 
the  Bank  of  Philadelphia  were  at  a  dis¬ 
count  of  80  per  cent.;  the  others  at  75  per 
cent,  and  50  per  cent.,  and  metallic  money 
disappeared  to  such  an  extent  that  paper 
had  to  be  used  to  replace  copper  coin.  The 
depreciation  of  fiat  money  raised  the  price 
of  everything;  this  superficial  occurrence 
was  looked  upon  as  a  real  increase,  and 
gave  rise  to  all  the  consequences  that  a 
general  inflation  of  value  could  produce. 
This  mistake  on  the  subject  of  artificial 
wealth  made  landed  proprietors  desire  un¬ 
usual  proceeds.  The  villager,  deceived  by 
a  demand  surpassing  his  ordinary  profits, 
extended  his  credit  and  filled  his  stores 
with  the  highest-priced  goods ;  and  impor¬ 
tations,  having  no  other  proportion  to  the 
real  needs  than  the  wishes  of  the  retailers, 
soon  glutted  the  market.  Every  one  wished 
to  speculate,  and  every  one  eagerly  ran  up 
debts.  Such  was  the  abundance  of  paper 


34 


A  Brief  History  of 


money  that  the  banks  were  alarmed  lest 
they  could  not  always  find  an  investment 
for  what  they  manufactured.  It  thus  hap¬ 
pened  that  it  was  proposed  to  lend  money 
on  collateral,  while  the  greatest  efforts  to 
bring  about  its  redemption  were  being  made. 
This  state  of  things  lasted  till  the  end  of 
1815,  when  it  was  recognized  that  the  paper 
circulation  had  not  enriched  the  commun¬ 
ity,  but  that  metallic  money  had  enhanced. 

The  intelligent  portion  of  the  nation 
comprehended  that  even  where  the  esti¬ 
mated  value  of  property  had  been  highest, 
the  true  welfare  of  society  had  diminished. 
They  learned  too  late  the  baleful  effects  of 
this  circulation  of  paper  money ;  the  greater 
part  of  the  States  and  cities  had  nothing  to 
show  for  it. 

A  new  class  of  speculators  then  ap¬ 
peared,  trying  to  pass  these  worthless  bank 
notes :  forgers  of  paper  money  became 
more  active.  In  the  midst  of  this  disorder 
a  National  Bank,  which  should  afford  a 
solid  basis  for  the  paper  circulation,  was 
considered.  Influenced  by  these  difficul¬ 
ties,  and  in  hopes  of  remedying  them,  the 


Panics  in  the  United  States.  35 

Secretary  of  the  Treasury  proposed  to 
Congress,  in  September,  1814,  a  few  days 
after  suspension,  to  found  a  national  bank, 
in  order  to  re-establish  metallic  circulation, 
an  end  which  the  State  banks  had  failed 
to  accomplish. 

This  project,  which  lent  the  national 
credit  to  the  capital  of  the  bank,  was  an¬ 
tagonized  by  a  good  many  members  who 
exaggerated  its  consequences ;  at  the  same 
time  that  they  took  more  or  less  important 
sums  in  bank  notes,  or  borrowed  from  the 
banks  upon  the  nation’s  guaranty,  in  order 
to  re-establish  the  public  credit  and  to  ob¬ 
tain  means  for  prolonging  the  war. 

Causes  of  the  Panic  of  1814. — The  bank 
directors  laid  the  blame  upon  the  blockade 
of  the  ports,  which,  interfering  with,  indeed 
even  preventing,  the  export  of  products, 
occasioned  the  outflow  of  the  metals.  The 
national  loans  to  carry  on  the  war  also  had 
their  influence.  From  the  beginning  of  hos¬ 
tilities  until  1814  they  increased  to  $52,- 
848,000,  distributed  as  follows :  Eastern 
States,  $13,920,000;  New  York,  Pennsyl¬ 
vania,  Maryland,  and  District  of  Columbia, 


36 


A  Brief  History  of 


$27,792,000  ;  Southern  and  Western  States, 
$11,136,000. 

Nearly  all  of  this  was  advanced  by  the 
cities  of  New  York,  Philadelphia,  and  Bal¬ 
timore.  The  banks  made  advances  beyond 
their  resources,  augmenting  their  circula¬ 
tion  in  consequence.1 

From  the  1st  of  January,  1811,  to  the 
1st  of  January,  1815,  one  hundred  and 

1  The  cause  of  the  crisis,  according  to  the  Committee  of  the 
Senate,  was  the  abuse  of  the  banking  system  ;  the  great  num¬ 
ber  and  bad  administration  of  the  banks  ;  and  their  speculations 
designed  to  advance  their  stock,  and  to  distribute  usurious 
dividends.  When  the  Bank  of  the  United  States  saw  the 
danger  that  menaced  it,  it  reduced  its  discounts  and  circula¬ 
tion.  The  circulation  of  the  country  banks  fell  from  $5,000,- 
000  to  $1,300,000,  and  the  total  circulation  from  $10,000,000 
to  93,000,000. 

Increase  and  Decrease  Circulation  in  Pennsylvania. 


City  Banks.  Country.  Total. 

1814  . $3,300,000  $1,900,000  $5,200,000 

1815  . 4,800,000  5,300,000  10,100,000 

1816  .  3,400,000  4,700,000  8,100,000 

1817  .  2,300,000  3,800,000  6,100,000 

1818  .  1,900,000  3,000,000  4,900,000 

1819  .  1,600,000  1,300,000  2,900,000 

Number 

of  Banks.  Capital.  Circulation.  Specie. 
1811 .  88  $52,000  00  $28,000  00  $15,000  00 

1815  .  208  82,000  00  45,000  00  17,000  00 

1816  .  246  89,000  00  68,000  00  19,000  00 


Panics  in  the  United  States . 


37 


twenty  new  banks  were  registered,  thus 
raising  their  capital  to  more  than  $80,000,- 
000 ;  this  increase  took  place  during  a  war 
that  entirely  did  away  with  foreign  trade. 
The  expenses  of  the  war  declared  against 
Great  Britain  in  June,  1812,  were  defrayed 
by  notes  issued  by  the  banks  of  the  various 
States.  Six  million  dollars  were  obtained 
from  them  in  1812,  in  the  following  year, 
1813,  twenty  million,  and  then  fifteen  mil¬ 
lion  in  exchange  for  twelve  million  of 

Federal  stock,  issued  at  the  price  of  $125 
face  for  every  $100  paid  in.  Until  Janu¬ 
ary  1,  1814,  in  order  to  avoid  taxation, 
Treasury  bonds  were  issued  in  addition  to 
what  was  contributed  by  the  banks. 

In  1812 . $3,000,000 

“  1813 .  6,000,000 

“  1814 .  8,000,000 

Up  to  this  time  no  account  of  their 

administration  had  been  rendered,  but  now 

♦ 

Mr.  Bland,  a  Maryland  representative, 
called  attention  to  the  fact  that  all  their 
operations  seemed  veiled  from  the  public. 
Unfortunately  we  have  been  unable  to  find 
a  statement  of  the  discounts. 


38 


A  Brief  History  of 


The  suspension  of  specie  payments  dif¬ 
fered  with  the  corresponding  state  of  affairs 
in  England,  inasmuch  as  it  was  not  general, 
and,  since  each  State  was  independent,  the 
depreciation  varied.  It  became  very  diffi¬ 
cult  to  circulate  paper,  and  the  Government 
was  again  obliged  to  issue  Treasury  bonds, 
bearing  6  per  cent,  interest.  In  February, 
1815,  peace  having  been  proclaimed,  it  was 
hoped  that  the  banks  would  resume  specie 
payments.  There  was  no  sign  of  it.  The 
re-establishment  of  peace  merely  made 
some  of  the  legal  regulations  seem  less 
pressing  upon  the  banks. 

In  the  middle  of  May,  1815,  the  first 
English  vessel  arrived,  and  business  became 
very  active  again.  In  May,  June,  and  July 
it  might  have  been  said  “This  is  the  golden 
age  of  commerce.”  Discounts  of  unsecured 
paper  were  easy,  and  it  was  not  an  unusual 
occurrence  to  have  notes  of  $60,000  offered. 

The  banks  had  authorized  a  suspension 
of  specie  payment  in  order  to  force  the 
issue  of  bank  notes,  and  to  stimulate  trade, 
although  Mr.  Carey  pretends  that  no  over¬ 
trading  had  taken  place.  He  blames  them 


Panics  in  the  United  States . 


39 


for  having  restricted  their  loans  in  October 
and  November,  thus  producing  a  decline  in 
prices ;  and  the  necessity  of  cutting  down 
credits  came  about,  according  to  him,  from 
the  speculations  in  National  securities. 

Six  Philadelphia  banks  with  a  capital  of 
$10,000,000  held  $3,000,000  in  Govern¬ 
ment  stock. 

On  the  15th  of  February,  1815,  when 
scarcely  through  with  all  this  confusion,  an 
effort  was  made  to  re-establish  for  the  second 
time  a  United  States  Bank.  It  was  author¬ 
ized  on  the  10th  of  April,  1816,  the  Act 
permitting  the  formation  of  a  Company, 
with  a  capital  of  $35,000,000,  divided  into 
350,000  shares  of  $100  each,  of  which  the 
Government  took  70,000  shares  and  the 
public  180,000  shares.  These  last  were 
payable  in  $7,000,000  of  gold  or  silver,  of 
the  United  States  of  North  America,  and 
$21,000,000  in  like  money,  or,  in  the  funded 
debt  of  the  United  States  either  in  the  6 
per  cent.  Consolidated  Debt  at  par,  the  3 
per  cent,  at  65,  or  the  7  per  cent,  at  106^ 
per  cent.  ;  upon  subscription  $30  was  pay¬ 
able,  of  which  at  least  $5  had  to  be  in  gold 


40 


A  Brief  History  of 


or  silver ;  in  six  months  after,  $35,  of  which 
$10  had  to  be  in  metal,  and  twelve  months 
after  the  same  amount  was  to  be  paid  in  the 
same  manner.  The  directors  were  author¬ 
ized  to  sell  shares  every  year  to  the  amount 
of  $2,000,000,  after  having  offered  them  at 
the  current  price  to  the  Secretary  of  the 
Treasury  for  fourteen  days.  The  Govern¬ 
ment  reserved  the  right  to  redeem  the  debt 
at  the  subscription  price. 

The  charter,  made  out  in  the  name  of 
the  president,  ran  until  March  3,  1836. 
There  were  twenty-five  directors  of  the  con¬ 
cern,  five  of  whom  were  appointed  by  the 
President  of  the  United  States  with  the 
consent  of  the  Senate,  and  not  more  than 
three  by  the  State ;  the  stockholders  chose 
the  others. 

The  corporation  could  not  accept  any 
inconvertible  property,  or  any  farm-mort¬ 
gage,  unless  for  its  immediate  use,  either  as 
security  for  an  existing  debt,  or  to  wipe 
out  a  credit. 

It  had  no  right  to  contract  any  debt 
greater  than  $35,000,000,  more  than  its  de¬ 
posits,  unless  by  special  act;  the  directors 


Panics  in  the  United  States .  41 

were  made  responsible  for  every  violation, 
and  could  be  sued  by  each  creditor.  They 
could  only  deal  in  gold  and  silver  exchange, 
and  not  in  other  country  securities  which 
could  not  be  realized  upon  at  once.  The 
Bank  could  purchase  no  public  debt  nor 
exceed  6  per  cent,  interest  on  its  discounts 
and  loans.  It  could  lend  no  more  than 
$500,000,  to  the  United  States,  $50,000,  to 
each  State,  and  nothing  to  foreigners.  It 
could  give  no  bill  of  exchange  greater  than 
$5,000  ;  bank  notes  less  than  $100  were  to 
be  payable  on  demand,  and  greater  sums 
were  not  allowed  to  run  longer  than  sixty 
days.  Two  settlements  were  to  take  place 
every  year. 

Branches  were  to  be  established  upon 
demand  of  legislative  authorities,  wherever 
2,000  shares  of  stock  were  subscribed  for. 

There  were  to  be  no  bank  notes  less  than 
$5.00,  and  every  bill  of  exchange,  or  bill 
payable  at  sight,  was  to  be  receivable  by 
the  public  Treasury. 

The  duty  of  the  Bank  was  especially  to 
pay  out  and  receive  the  public  money, 
without  profit  or  loss.  It  was  to  serve  as 


42 


A  Brief  History  of 


agent  for  every  State  contracting  a  loan ; 
the  cash  belonging  to  the  United  States 
was  to  be  deposited  at  the  Bank  whenever 
the  Secretary  of  the  Treasury  did  not  dis¬ 
pose  of  it  otherwise,  in  which  case  he  was 
to  notify  Congress. 

Neither  the  Directory  nor  Congress  could 
suspend  payment  of  the  bank  notes,  dis¬ 
counts,  or  deposits :  such  refusal  carried  a 
right  to  1 2  per  cent,  interest.  In  exchange 
for  this  charter  the  Bank  was  to  give 
$1,000,000,  to  the  Government  in  three 
instalments. 

The  charter  was  exclusive  during  its  life, 
excepting  in  the  District  of  Columbia, 
where  banks  might  be  authorized,  provided 
their  capital  did  not  exceed  $6,000,000. 

The  Bank  did  not  open  at  once,  for  it 
sent  an  agent  to  Europe  to  look  up  bullion. 

Between  July,  1817,  and  December,  1818, 
it  thus  procured  $7,311,750,  at  an  expense 
of  $525,000.  On  the  20th  of  February, 
1817,  it  was  decided  that,  excepting 
gold  and  silver  and  Treasury  notes,  no 
notes  would  be  received  at  the  Government 
Treasuries,  save  such  as  were  payable  to  the 


Panics  in  the  United  States.  43 

banks  in  hard  money.  Notwithstanding 
this  discrimination  the  banks  decided  not  to 
resume  specie  payment  until  the  1st  of 
July,  1817. 

In  the  meantime  an  immense  speculation 
had  taken  place  in  its  stock,  which  was 
compromising  for  the  Bank  and  for  the 
credit  of  its  Directory,  because  several  of 
its  Directors  appointed  by  the  Government 
took  part  in  it.  For  example,  it  became 
customary  to  loan  a  very  large  amount  of 
money  on  the  Bank’s  own  stock,  as  much 
as  $125  on  each  share  of  $100.  Thus 
more  than  the  purchase  price  was  loaned 
upon  them  :  in  furnishing  the  means  of 
paying  for  them  by  credit,  speculation 
was  aroused,  and  on  the  1st  of  September, 

1817,  the  market  price  advanced  to  $156.50, 
at  which  rate  it  continued  until  December, 

1818,  when  it  fell  to  $110. 

At  last  the  public  perceived  that  the 
excessive  issue  depreciated  the  bank-note 
circulation,  and  that  a  greater  shrinkage 
was  imminent. 

An  office  for  the  payment  of  bank  divi¬ 
dends  was  opened  in  Europe,  so  as  to 


44 


A  Brief  History  of 


increase  the  price  of  the  stock  and  the 
speculation  in  it  through  this  facility, 
rather  than  for  the  permanent  benefit  of 
the  institution.  Let  us  note  here  the  short¬ 
sightedness  of  the  Directors,  who  thought 
they  would  stem  the  depreciation  of  their 
means  of  payment  by  persuading  all  the 
banks  to  declare  what  was  not  true,  that 
the  bank  notes  were  worth  par. 

On  the  21st  of  February,  still  aiming  at 
the  same  end,  they  announced  the  resump¬ 
tion  of  specie  payment.  The  State  Banks, 
remembering  the  embarrassment  of  the 
public,  which  for  two  years  had  paid  an 
exchange  of  6  per  cent.,  persuaded  them¬ 
selves  that  few  people  would  dare  to  ask 
for  large  sums.  They  hoped  to  come  to  an 
understanding  and  to  cause  the  acceptance 
of  a  promise  to  pay  upon  a  designated  day. 

We  say  “  a  promise  to  pay,”  for  this  was 
not  a  serious  proposition,  inasmuch  as 
foreign  money  and  that  of  the  United 
States  had  enjoyed  a  higher  market  value 
for  a  long  time. 

The  depreciation  of  the  bank  notes  might 
result  just  as  well,  from  the  fear  of  the 


Panics  in  the  United  States.  45 

public’s  enforcing  its  rights,  as  from  a 
refusal  of  the  banks  to  make  good  their 
promises.  This  understanding  was  not, 
properly  speaking,  a  resumption  of  specie 
payment,  but  rather  a  kind  of  humbug. 

In  January  the  banks  of  New  York, 
Philadelphia,  Baltimore,  Richmond,  and 
Norfolk  decided  to  resume  specie  payment 
on  the  20th  of  February,  provided  the 
balance  showing  against  them  was  not  de¬ 
manded  by  the  Bank  of  the  United  States 
before  discounts  became  $2,000,000,  at 
New  York,  as  much  in  Philadelphia,  and 
$1,500,000  in  Baltimore ;  and  these  condi¬ 
tions  were  accepted. 

The  discount  line  of  the  Bank  of  the 
United  States  was  thus  greatly  increased ; 
it  grew  from  $3,000,000  on  the  27th  of 
February  to  $20,000,000  on  the  30th  of 
April;  to  $25,000,000  on  July  29th,  and 
to  $33,000,000  on  the  31st  of  October. 
The  Bank  imported  much  metallic  money, 
redeemed  its  notes  and  those  of  its  branches 
without  distinction ;  the  notes  of  its  East¬ 
ern  and  Southern  branches  were  returned 
as  soon  as  those  of  the  North  had  paid 


46 


A  Brief  History  of 


them,  and  they  were  newly  issued ;  conse¬ 
quently  eighteen  months  after  this  prac¬ 
tice  began  the  cash  boxes  of  the  North 
were  drained  of  their  capital,  the  length  of 
discount  was  reduced,  and  5  per  cent, 
was  charged  for  sixty  days.  On  April  1, 
1819,  only  $126,000,  cash  remained  on 
hand,  on  the  12th  only  $71,000,  remained, 
$196,000,  was  owed  to  the  city  banks. 

Scarcely  had  the  Directors  of  the  Na¬ 
tional  Bank  succeeded  in  replacing  the 
paper  issued  but  not  redeemed  by  their 
bank-note  circulation,  being  fully  aware 
from  their  own  experience  that  the  circula¬ 
tion  could  only  reach  a  limited  amount, 
than  they  inundated  the  market  with  it, 
and  in  a  few  mouths  all  reductions  van¬ 
ished.  In  this  way  the  market  price 
shortly  resumed  its  former  quotation,  and 
all  the  difficulties  reappeared.  This  im¬ 
prudent  management  necessarily  threw  one 
portion  of  the  public  into  debt,  from  which 
it  had  saved  itself ;  and  the  other  portion 
into  the  vortex  which  it  had  avoided.  The 
critical  moment  was  delayed  somewhat, 
but  the  day  of  reckoning  was  near. 


I 


Panics  in  the  United  States .  47 

The  Panic  of  1818. — The  Bank  at  last  dis¬ 
covered  that  it  had  passed  the  bounds  of 
safety  through  its  issues,  and  that  it  was 
at  the  mercy  of  its  creditors.  It  saw  firstly, 
on  October  21,  1818,  the  payment  of  part 
of  the  State  of  Louisiana’s  foreign  debt 
withdraw  large  sums,  and  then  Chinese, 
Indian,  and  other  goods  reach  fancy  prices 
because  of  the  depreciation  of  the  circulat¬ 
ing  medium.  All  these  influences  produced 
a  demand  for  specie  payment  which  the 
Bank  as  a  public  one  was  obliged  to  meet, 
under  penalty  of  12  per  cent,  interest,  and 
without  power  to  avail  itself  of  the  same 
accounts  as  the  State  banks. 

From  this  moment  it  thought  fixedly  of 
its  safety  and  of  how  to  reduce  its  notes ; 
this  reduction  obliged  the  other  banks  to 
imitate  it,  and  a  new  crisis  shook  trade  in 
the  end  of  October,  1818.  During  one 
year  the  National  Bank  furnished  from  its 
cash  boxes  more  than  $7,000,000,  and  the 
others  more  than  $3,000,000. 

The  State  banks  naturally  followed  the 
same  policy  in  their  connection,  and  their 
circulation  became  reduced  as  follows : 


48 


A  Brief  History  of 


On  November  i,  1816,  to . $4,756,000 

“  “  “  1817,  “ .  3,782,000 

“  “  “  1818,  “ .  3,011,000 

“  “  “  1819,  “ .  1,318,000 

It  will  give  a  faint  idea  of  the  excessive 

issue  to  state  that  the  only  difficulty  was 
the  impossibility  of  examination  by  the 
President  and  Cashier,  and  of  their  jointly 
signing  the  notes,  which  was  made  obliga¬ 
tory  by  the  regulations ;  hence  they  asked 
power  from  Congress  to  grant  this  right  to 
the  Presidents  and  Cashiers  of  the  Branch 
Banks.  This  facility  was  refused,  but 
Congress  granted  a  ATce-President  and  a 
Vice-Cashier  to  sign.  With  these  issues 
and  a  simple  capital  of  $2,000,000,  the  Bank 
discounted  as  much  as  $43,000,000,  during 
one  year,  in  addition  to  $11,000,000,  to 
$12,000,000,  loaned  upon  public  securities. 

In  order  to  carry  on  its  operations,  it  ex¬ 
changed  in  Europe  a  portion  of  its  funded 
debt  for  gold  and  silver,  and  bought  specie 
in  the  West  Indies.  From  July,  1817,  to 
July,  1818,  it  imported  $6,000,000,  of  specie, 
at  an  expense  of  $500,000,  but  the  exces¬ 
sive  issue  of  paper  drained  away  the  cash 
more  rapidly  than  the  Bank  could  import 


Panics  in  the  United  States .  49 

it.  In  the  face  of  this  hopeless  struggle, 
in  July,  1818,  it  entirely  changed  its  course 
and  reduced  its  discounts,  and  10  per  cent, 
premium  was  then  paid  for  cash,  and  the 
reduction  of  nearly  $5,000,000,  in  the  dis¬ 
count  line  in  three  months  only  had  a  dis¬ 
astrous  effect,  while  at  the  same  time  they 
would  only  receive  for  redemption  the 
notes  issued  by  each  Branch  Bank :  hence 
general  embarrassment  arose,  and  as  the 
Bank  of  the  United  States  was  withdraw¬ 
ing  cash  from  the  local  banks,  Congress 
wished  to  forbid  the  exportation  of  gold 
and  silver.  The  committee  appointed  on 
the  30th  of  November,  1818,  to  examine 
the  affairs  of  the  Bank  concluded  that  it 
had  violated  its  charter : 

1.  In  buying  $2,000,000,  of  the  Public 
Debt. 

2.  In  not  requiring  from  the  purchasers 
of  its  stock  the  payment  of  the  second  and 
third  instalments  in  cash,  and  in  the  Public 
Debt  of  the  United  States. 

3.  In  paying  dividends  to  purchasers 
of  its  stock  who  had  not  entirely  paid 
up. 


50 


A  Brief  History  of 


4.  In  allowing  voting  by  proxy  to  a 
greater  extent  than  the  charter  permitted. 

Upon  receipt  of  the  report  the  Governor 
fled,  and  the  shares  fell  to  $93.  In  1818 
the  speculation  was  so  wild  that  no  one 
failed  on  account  of  a  smaller  sum  than 
$100,000.  A  drawing-room  that  had  cost 
$40,000,  and  a  bankrupt’s  wine-cellar  esti¬ 
mated  to  have  cost  $7,000,  were  cited  as 
instances  of  the  general  prodigality. 

The  Senatorial  Committee  of  Inquiry  de¬ 
clared  that  the  panic  imposed  ruinous  losses 
upon  landed  property,  which  had  fallen 
from  a  quarter  to  even  a  half  of  its  value. 
In  consequence  forced  sales,  bankruptcies, 
scarcity  of  money,  and  a  stoppage  of  work 
occurred.  House-rents  fell  from  $1,200,  to 
$450  ;  the  Federal  stock  alone  held  its  own 
at  103  to  104. 

On  the  13th  of  December,  1819,  a  Com¬ 
mittee  of  the  House  of  Representatives  re¬ 
ported  that  the  panic  extended  from  the 
greatest  to  the  smallest  capitalists.  It 
concluded  by  demanding  the  intervention 
of  the  legislative  power  to  restrain  the  cor¬ 
poration,  which,  spreading  its  branches 


Panics  i?i  the  United  States.  5 1 

throughout  the  Union  had  inundated  it 
with  nearly  $100,000,000,  of  new  circula¬ 
ting  medium.  Those  who  unfortunately 
owed  money  lost  all  the  fruit  of  long  work, 
and  skilled  laborers  were  obliged  to  ex¬ 
change  the  shelter  of  their  old  homes  for 
the  inhospitable  western  forests.  Forced 
sales  of  provisions,  merchandise,  and  imple¬ 
ments  were  made,  greatly  below  their  pur¬ 
chase  price.  Many  families  were  obliged  to 
limit  their  most  necessary  wants.  Money 
and  credit  were  so  scarce  that  it  became 
impossible  to  obtain  a  loan  upon  lands  with 
the  securest  titles;  work  ceased  with  its 
pay,  and  the  most  skilful  workman  was 
brought  to  misery ;  trade  restricted  itself 
to  the  narrowest  wants  of  life  ;  machinery 
and  manufactories  lay  idle;  the  debtor’s 
prison  overflowed ;  the  courts  of  justice 
were  not  able  to  look  after  their  cases,  and 
the  wealthiest  families  could  hardly  obtain 
enough  money  for  their  daily  wants. 

The  Committee  appointed  by  the  Senate 
of  Pennsylvania  reported  on  the  29th  of 
January,  1820,  that,  to  prevent  a  bad  ad¬ 
ministration  of  the  banks,  it  was  necessary  : 


52 


A  Brief  History  of 


1.  To  forbid  them  to  issue  more  than 
half  of  their  capital  in  notes. 

2.  To  divide  with  the  State  all  divi¬ 
dends  in  excess  of  6  per  cent. 

3.  Excepting  the  president,  that  no 
director  should  be  re-appointed  until  after 
an  interval  of  three  years. 

4.  To  submit  to  the  State’s  inspection 
the  bank’s  business  and  books. 

From  this  period  excessive  profits  and 
losses  ceased  on  the  part  of  the  American 
banks.  The  change  of  directory  of  the 
National  Bank,  called  forth  by  the  unfor¬ 
tunate  experience  of  1818,  was  the  begin¬ 
ning  of  a  very  fortunate  epoch.  As  was 
always  the  case,  business  affairs  resumed 
their  usual  course  when  liquidation  ceased. 
Among  the  various  causes  assigned  for  the 
panic,  the  increase  of  import  duties  had  to 
be  pointed  out,  and  the  decrease  of  the 
Public  Debt  which  was  reduced  between 
1817  and  1818  more  than  $80,000,000. 

It  was  impossible  to  turn  any  portion  of 
the  public  deposits  in  proper  time  either 
into  Federal  stock  or  such  other  forms  of 
value  as  its  creditors  might  demand,  with- 


Panics  in  the  United  States .  53 

out  shaking  or  breaking  down  any  respect¬ 
able  institution  whatever.  But  .these  seem 
to  be  only  secondary  causes. 

Panic  of  1825  to  1826. — In  1824  in  Penn¬ 
sylvania  there  was  a  new  rage  for  banks, 
and  in  1825  there  was  a  repetition  of  the 
marvellous  days  of  1815.  American  bank¬ 
ing  bubbles  have  always  been  exactly 
similar  to  the  English  South  Sea  bubble, 
and  to  Law’s  bank  in  France.  In  July, 
after  an  advance  dating  from  1819,  there 
was  a  reaction,  a  panic,  and  liquidation. 
Here  we  cannot  point  out  any  of  the  causes 
which  we  have  indicated  above ;  the  growth 
of  trade  and  the  exaggeration  of  discount 
sufficiently  explain  the  difficulties  of  the 
situation. 

In  Pennsylvania  in  1824  a  bill  was 
passed  re-establishing  the  charters  of  all 
the  banks  which  had  failed  in  1814.  In 
New  York  they  thought  of  banks  alone; 
companies  with  a  capital  of  $52,000,000 
were  formed.  Beady  money  had  never 
been  so  abundant,  if  we  can  judge  of  it  by 
the  amount  of  subscriptions  and  the  great 
speculations  in  stocks. 


54 


A  Brief  History  of 


Three  millions  were  subscribed  to  the 
“New  Jersey  Protection  Company  ”  in  one 
day.  But  in  July,  when  the  decline  on 
the  London  market  was  reported,  the  want 
of  hard  money  forced  itself  into  notice. 
Exchange  on  England  rose  from  5  per  cent, 
to  10  per  cent.;  the  discount  on  New  Or¬ 
leans  notes,  from  3  per  cent,  became  50  per 
cent.,  and  on  the  4th  of  December  it  had 
fallen  back  to  4  per  cent.  What  fluctua¬ 
tion  !  What  disasters  ! 

Mr.  Biddle,  the  President  of  the  United 
States  Stock  Bank,  said  that  the  crisis  of 
1825  was  the  most  severe  that  England  had 
ever  experienced,  superinduced  as  it  was 
by  the  wild  American  speculation  in  cottons 
and  mines.  Cotton  cloth  fell  from  18  to 
13  cents  per  yard  ;  and  out  of  4,000  weav¬ 
ers  employed  in  Philadelphia  in  1825  not 
more  than  1,000  remained.  The  reaction 
of  liquidation  was  experienced  in  1826,  and 
from  1827  money  was  abundant. 

Embarrassment  of  the  Local  Banks  in 
1828  to  1829.— Is  it  necessary  to  mention 
these  embarrassments  ?  The  trouble  of  1 828 
affected  only  the  local  banks  and  not  at 


Panics  in  the  United  States .  55 

all  those  of  the  United  States.  The  chief 
cause  was  the  Bank  of  the  United  States’ 
increase  of  circulation  from  August,  1822, 
to  August,  1828.  From  $5,400,000  it  had 
become  $13,000,000  without  adding  any¬ 
thing  to  the  circulation,  merely  displacing 
an  equal  amount  of  local  bank  notes  through 
drafts  of  branches  that  it  put  into  circula¬ 
tion.  These  branch  banks’  drafts  were  in 
form  of  bank  notes,  signed  by  the  chief 
employees  of  the  branches,  drawn,  it  might 
be,  on  each  other  or  on  the  main  bank.  A 
great  issue  of  paper  was  thus  brought 
about ;  without  this  roundabout  method 
it  would  have  been  impossible  to  have 
forced  the  issue  of  the  notes  from  the  mere 
physical  inability  of  the  president  and 
cashier  to  sign  so  large  a  number.  Con¬ 
gress  had  always  refused  to  delegate  this 
power  to  any  other  persons ;  in  consequence 
of  this  practice  the  inevitable  result  oc¬ 
curred  in  1828,  as  might  have  been  foreseen, 
and  a  conflict  between  notes  of  the  Bank 
of  the  United  States  and  that  of  the  local 
banks  occurred. 

These  drafts  circulated  everywhere ;  the 


56 


A  Brief  History  of 


branch  banks  received  them  on  deposit, 
but  did  not  redeem  them :  hence  it  was 
necessary  to  guard  against  panic  by  keep¬ 
ing  hold  of  cash.  This  course  increased 
the  issue  of  the  Bank  of  the  United  States, 
and  of  the  local  banks  which  discounted 
the  paper  of  the  central  bank  as  if  it  were 
so  much  cash.  The  local  banks,  then,  whose 
paper  did  not  widely  circulate,  exchanged 
their  bank  notes  for  drafts,  thus  reducing 
the  amount  of  circulation  of  the  first,  in¬ 
creasing  that  of  the  central  bank,  and 
hence  that  of  the  total  issue  of  its  bank 
notes ;  the  local  banks  continued  to  ex¬ 
change  their  paper  with  its  narrow  and 
limited  circulation  for  drafts  of  this  latter, 
which  passed  everywhere. 

There  occurred,  then,  in  1828  and  1829 
an  accidental  and  very  brief  scarcity  of 
cash,  whose  cause  we  have  just  indicated; 
but  since  the  second  half  of  the  year 
difficulties  arising  from  metallic  circulation 
had  disappeared. 

Panic  of  1831. — The  course  of  business, 
having  scarcely  suffered  a  stoppage,  .con¬ 
tinued  until  1831,  and  not  till  then  did 


Panics  in  the  United  States .  5  7 

embarrassment  occur  (Oct.  8,  1831). 

Until  then  business  operations  were  very 
active  and  money  easy ;  the  revolution  in 
Europe  rendered  capital  available  in 
America,  whilst  the  cholera  and  the  revolu¬ 
tion  restrained  the  importation  of  foreign 
goods.  Discounts  at  the  central  bank  rose 
from  $24,000,000  in  1826  to  $44,000,000 
in  1831,  and  the  circulation  from  $9,000,- 
000  to  $22,000,000.  The  same  increase 
was  observable  in  the  banks  of  the  differ¬ 
ent  States. 

In  March,  1830,  the  Bank  of  the  United 
States  had  in  its  vaults  $8,000,000,  which 
was  more  than  it  had  ever  had  before. 

In  1829  the  Bank  of  New  York  claimed 
to  have  so  much  money  that  it  did  not 
know  what  to  do  with  it.  In  1829,  1830, 
1831,  the  banks  extended  their  operations, 
and  a  rise  in  prices  accompanied  the  ease 
of  getting  credit;  but  in  November,  1831, 
very  urgent  demands  for  money  were 
heard. 

The  branch  drafts,  exchanged  with  the 
local  banks,  allowed  them  to  increase  their 
circulation  and  consequently  their  dis- 


58 


A  Brief  History  of 


counts.  American  writers  boasted  greatly 
about  the  assistance  the  Bank  of  the 
United  States  yielded  both  to  business  and 
the  nation.  Nevertheless,  in  1829,  Presi¬ 
dent  Jackson  declared  the  conduct  of  the 
Bank  to  be  such  that  its  usefulness  had 
been  justly  doubted  by  many  citizens,  and 
that  the  end  desired,  a  uniform  and  regular 
circulation,  had  not  been  reached.  The 
Senate  and  the  House  of  Representatives 
appointed  a  commission  that  expressed  an 
opinion  contrary  to  that  of  the  President. 

Panic  of  1837  to  1839.— In  the  midst  of 
all  these  troubles  the  Secretary  of  the 
Treasury  informed  the  President  of  the 
Bank  in  1832  that  the  Government  in¬ 
tended,  wherever  it  had  representatives,  to 
redeem  half  of  the  3  per  cent,  stocks  by 
paying  each  holder  for  half  of  his  certifi¬ 
cates.  The  President  answered  that  at 
that  time  (March  29th)  this  redemption  from 
the  European  creditors  would  very  greatly 
embarrass  home  business,  and  that  therefore 
delay  was  necessaiy.  He  requested  a  delay  of 
three  months,  because  trade  circles  of  New 
York  had  already  received  large  advances. 


Panics  in  the  United  States .  59 

The  Bank,  being  the  agent  of  the 
Treasury  and  having  $1 1,600,000  on  deposit, 
would  have  been  forced  to  become  a  bor¬ 
rower  in  order  to  pay  out  the  $2,700,000 
demanded  from  it.  However,  its  request 
was  granted. 

Jackson  soon  learned  with  surprise  that, 
business  being  more  impeded  than  ever, 
the  President  had  despatched  an  agent  to 
England  to  contract  with  the  Barings  a 
loan  of  $6,000,000.  Seeing  the  Bank  to 
be  insolvent  he  resolved  not  to  renew  its 
charter.  The  Bank  tried  to  hide  its 
insolvency  by  the  most  foolish  land  specu¬ 
lations,  which  had  already  caused  such 
great  disaster  in  1818  and  1820.  The  issue 
of  bank  notes  had  given  fresh  spirit  to 
speculation.  These  bank  notes  were 
received  by  the  National  Treasury  and 
returned  to  the  Bank  on  deposit,  which 
again  loaned  them  to  pay  for  land  upon 
security  of  the  land  sold,  with  the  result 
that  the  credit  granted  the  Nation  was 
merely  fictitious. 

In  1832,  Congress  having  voted  for  the 
extension  of  the  Bank’s  charter,  President 


6o 


A  Brief  History  of 


Jackson  refused  to  ratify  it  on  account 
especially  of  certain  changes  it  sought  to 
introduce.  “Why,”  said  he,  “grant  a 
capital  of  $35,000,000  when  the  first  com¬ 
pany  only  had  $11,000,000  ?  ” 

But  though  the  Bank’s  charter  could  not 
be  arranged,  the  law  of  July  10,  1832, 
dealing  with  the  regulation  of  banks,  pre¬ 
scribed  that  “  a  report  ”  upon  their  exact 
condition  should  be  submitted  to  Congress 
every  year. 

In  1833  General  Jackson  ordered  the 
withdrawal  of  the  Government  deposits 
from  the  Bank.  The  law  required  that 
the  reasons  for  the  withdrawal  of  the 
deposits  should  be  given,  and  the  secre¬ 
tary,  Mr.  Duane,  refused  to  give  them, 
saying  the  Bank  was  not  insolvent.  He 
was  dismissed  and  replaced  by  a  more 
amenable  secretary.  The  deposits  were 
withdrawn  and  placed  in  different  State 
Banks.  The  Bank  of  the  United  States 
was  obliged  to  limit  its  discounts  and 
loans,  thus  causing  trouble :  however,  the 
President  wished  at  any  loss  to  establish 
a  metallic  circulation. 


Panics  in  the  United  States.  61 

Congress  was  busy  through  the  whole 
session  of  1833-1834  upon  the  withdrawal 
of  the  deposits  from  the  Bank.  The  Senate 
sided  with  the  Bank  and  condemned  the 
President’s  resolution  :  the  House  of  Repre¬ 
sentatives,  on  the  contrary,  approved  his 
conduct.  The  Bank  stopped  its  dealings 
with  the  Government  in  1836 :  the  Presi¬ 
dent,  Mr.  Biddle,  whom  the  stockholders 
had  complimented  by  presenting  him  a 
silver  service,  obtained  through  a  gift  of 
$10,000,000,  whose  distribution  was  en¬ 
tirely  shrouded  in  mystery,  the  especial 
charter  of  the  Bank  of  Pennsylvania.  He 
was  unwilling  to  render  any  account  to  Con¬ 
gress,  notwithstanding  reiterated  demands. 
His  charter  terminated  in  1836,  and  two 
years  after  he  no  longer  had  the  right  to 
transact  any  business. 

\  When  they  had  obtained  the  extension 
of  the  charter  of  the  Bank  of  Pennsyl¬ 
vania,  the  Directors  apparently  gave  no 
attention  to  paying  their  obligations  to 
the  Government  ($16,000,000).  They 
had  turned  over  books,  papers,  notes, 
and  engagements  to  the  new  corpora- 


62  A  Brief  History  of 

tion,  which  opened  as  a  successor  to  the 
former  one. 

They  had  already  put  bank  notes  in  cir¬ 
culation,  despite  a  notification  to  redeem 
them,  and  to  destroy  those  which  remained 
in  their  hands. 

President  Jackson  and  his  successor,  Van 
.  7 
Buren,  considered  the  excessive  issue  of 

paper  money  as  the  principal  cause  of  the 
panic,  as  well  as  of  the  overdoing  of  every 
branch  of  trade,  of  the  boundless  specula¬ 
tions,  the  increase  of  foreign  debts,  of 
imprudent  land  speculations,  and  of  the 
alarming  increase  of  a  luxury  fatal  to 
the  springs  of  industry  and  to  the  moral¬ 
ity  of  the  people.  President  Van  Buren 
said  that  the  $30,000,000  entrusted  to 
the  Bank  had  fostered  lawless  specula¬ 
tions.  He  strained  every  effort  to  re¬ 
establish  metallic  circulation :  the  banks 
whose  notes  were  below  $5  were  no 
longer  recognized  by  the  National  Treasury. 
Until  the  3d  of  March,  1837,  it  was  allow¬ 
able  to  make  payments  with  $10  notes, 
after  that  time  with  $20,  and  finally  the 
banks  were  only  to  accept  notes  whose 
exchange  was  at  par. 


Panics  in  the  United  States .  63 


President  Adams  favored  small  paper 
notes  of  25  to  10  cents,  to  the  extent  of 
$1,000,000.  From  1831  to  1837,  $3,400,- 
000  twenty-five  cent  notes,  $5,187,000  ten- 
cent  notes,  and  $9,771,000  five-cent  notes 
were  issued.  To  prevent  an  abuse  of  this 
it  was  necessary  to  resume  a  metallic 
circulation  immediately.  In  1833  the 
amount  of  small  notes  issued  had  already 
reached  $37,000,000;  in  1837  it  became 
$73,000,000;  it  even  exceeded  these  fig¬ 
ures  ;  it  was  this  circulation  of  small  paper 
notes  that  had  to  be  made  smaller  than 
$120,000,000. 

Notwithstanding  these  frequent  panics 
the  national  prosperity  and  the  increase  of 
wealth  were  unquestionable  and  astonished 
all  observers. 

From  1817  to  1834  the  national  expenses 
diminished  from  $39,000,000  to  $24,000,- 
000,  decreasing  even  to  $14,000,000  in  1835, 
while  the  income  grew  to  $37,000,000. 

From  1826  to  1836  the  condition  of 
business,  despite  the  panic  of  1831,  grew 
easier.  Industries,  agriculture,  and  com¬ 
merce  were  prosperous  and  every  enter¬ 
prise  was  successful.  Both  in  New  Orleans 


64 


A  Brief  History  of 


and  in  New  York  there  was  much  building, 
and  more  than  1508  houses  were  erected 
between  January  1  and  September  1, 
1836.  This  general  prosperity  carried 
with  it  the  seeds  of  trouble. 

The  rapid  increase  of  the  National  rev¬ 
enue  gave  birth  to  the  belief  that  capital 
had  increased  in  the  same  proportion. 
This  superabundance  of  income  produced 
temporarily  by  the  inflation  in  business 
was  recklessly  thrown  away.  People  spec¬ 
ulated  in  land,  projected  a  hundred  rail¬ 
roads,  canals,  mines,  and  every  sort  of 
scheme,  which  would  have  absorbed  $300,- 
000,000  if  carried  out. 

The  national  capital  being  insufficient, 
loans  were  made  in  England  and  Holland, 
where  the  rate  of  interest  being  more  mod¬ 
erate  stimulated  the  passion  for  enterprises. 
Finally,  in  order  to  stop  the  flow  of  Eng¬ 
lish  capital  to  America,  the  Bank  of  Eng¬ 
land  raised  the  rate  of  interest ;  this  brought 
people  to  their  senses.  They  saw  the  im¬ 
possibility  of  carrying  out  a  third  of  their 
schemes.  Cotton  fell,  and  panic  seized  the 
public. 


Panics  in  the  United  States.  65 

Since  1818  a  period  of  flow  and  ebb  in 
trade  bad  been  seen  every  five-  or  six  years, 
but  this  stoppage  was  much  more  serious. 
The  lack  of  ready  money  and  capital  de¬ 
stroyed  confidence.  Money  was  not  to  be 
had  upon  any  collateral ;  and  the  banks 
stopped  discounting.  The  people  lacked 
bread,  the  streets  were  deserted,  the  thea¬ 
tres  empty ;  social  observances  were  in 
abeyance,  there  were  no  more  concerts,  and 
the  whole  social  round  was  stopped. 

The  Bank  of  the  United  States  used 
various  expedients  to  temporarily  moderate 
the  crisis  until  the  very  moment  that  it 
burst  all  the  more  violently  in  1839,  and 
brought  about  a  new  and  radical  reform. 

From  the  time  that  the  separation  of  the 
Bank  of  the  United  States  from  the  Gov¬ 
ernment  and  the  cessation  of  its  operations 
as  the  National  Bank  was  brought  about,  the 
quotation  on  bank  notes  considerably  de¬ 
creased,  as  well  for  those  payable  at  sight 
as  for  the  deferred  notes  payable  in  twelve 
months.  The  President  sent  an  agent  to 
London  to  raise  money  upon  the  bank 
shares. 


66 


A  Brief  History  of 


Fearing  that  General  Jackson  would  not 
establish  a  new  bank,  and  by  way  of  coun¬ 
terpoise,  one  hundred  banks  were  created 
with  a  capital  of  more  than  $125,000,000; 
issues  of  bank  stock  were  not  to  exceed 
three  times  the  amount  of  the  capital,  but 
this  provision  was  not  observed  ;  the  issue 
was  without  regulation  and  without  limits, 
and  during  an  inflation  in  prices  of  the 
necessaries  of  life  which  had  doubled  in 
value,  and  which  had  turned  the  people’s 
attention  to  agriculture.  The  price  of  land 
had  for  some  time  advanced  tenfold,  and 
the  advance  in  cotton  caused  the  Southern 
planters  to  abandon  indigo  and  rice. 

Imports  in  1836  exceeded  the  exports 
by  $50,000,000,  which  had  to  be  paid  in 
gold  or  silver.  This  outflow  of  metal 
created  a  great  void. 

The  advance  in  the  discount  rate  in  the 
Bank  of  England  under  such  circumstances 
came  like  a  thunder-clap,  and  the  distended 
bladder  burst.  Banks  suspended  payment, 
and  bank  notes  lost  from  10  to  20  per  cent. 
Exchange  on  France  and  England  rose  to 
22  per  cent.,  all  metal  disappeared  from 


Panics  in  the  United  States .  67 

circulation,  and  a  thousand  failures  took 
place.  The  English  export'  houses  lost 
from  £5,000,000  to  £6,000,000  sterling; 
values  fell  from  maximum  to  minimum. 
The  losses  in  America  were  even  greater ; 
cotton  fell  to  nothing.  At  the  worst  of 
the  panic  people  turned  to  the  Bank  of 
the  United  States,  and  its  President,  being 
examined  as  to  the  means  of  remedying 
the  trouble,  stated  that  it  was  above  all 
necessary  to  maintain  the  credit  of  the 
Bank  of  England  in  stead  and  in  place  of 
private  credit,  which  had  disappeared.  He 
proposed  to  pay  everything  in  bank  paper 
on  Paris,  London,  and  Amsterdam. 

When  the  panic  came  the  Bank  was  very 
much  shaken.  At  the  beginning  of  April, 
1837,  the  New  York  banks  suspended  pay¬ 
ments  because  demands  for  hard  money  for 
export  played  the  chief  role ;  the  other 
banks  suspended  in  their  turn,  promising 
to  resume  with  them. 

The  Bank  of  the  United  States  sus¬ 
pended  also,  Mr.  Biddle,  the  President,  as¬ 
serting  that  it  would  have  continued  to 
pay  were  it  not  for  the  injury  done  by  New 


68 


A  Brief  History  of 


York.  This  was  false,  for  the  New  York 
banks  shortly  after  resumed  payment,  hop¬ 
ing  they  would  be  imitated,  but  the  other 
banks  refused  to  do  so.  Mr.  Biddle  wished, 
in  the  first  place,  to  await  the  result  of  the 
harvest.  To  uphold  the  Bank,  he  tried  to 
bring  about  exchanges,  both  with  banks 
and  general  business,  not  only  in  America 
but  in  Europe,  in  order  to  establish  a  unity 
of  interests  which,  would  sustain  him  and 
conceal  his  real  condition.  In  this  he  was 
successful  to  a  certain  degree,  for  in  1840 
in  his  balance  sheet  $53,000,000  of  paper 
of  the  different  States  was  shown  up.  He 
wished  above  all  to  secure  the  monopoly 
of  the  sale  of  cotton :  a  senseless  specula¬ 
tion  hitherto  unexampled,1  the  like  of 
which  may  never  be  seen  again. 

Whilst  the  Bank  came  to  the  relief  of 
New  York  business  through  its  exchange 
and  its  deferred  notes,  Biddle  posed  as 
the  great  cotton  agent,  on  condition  that 
the  Bank’s  agents  should  be  consigned  to 
at  Havre  and  Liverpool.  In  their  embar- 


1  A  similar  episode  has  occurred  in  our  time  in  the  specula¬ 
tion  in  metals  by  the  “  Comptoir  d’Escompte.” 


Panics  in  the  United  States .  69 

rassment  this  proposition  was  accepted  by 
the  planters.  Cotton  was  thus  accumu¬ 
lated  in  those  two  places.  This  monopoly 
advanced  the  price,  and  vast  sums  were 
realized,  which  enabled  him  to  enlarge  the 
scope  of  his  business.  In  1837  he  was  en¬ 
abled  by  this  means  to  draw  on  London 
for  <£3,000,000  sterling ;  the  difference  be¬ 
tween  5  to  6  per  cent,  interest  and  dis¬ 
count  at  2  per  cent,  produced  a  very 
handsome  profit.  The  cotton  merchants 
prospered  as  well  as  the  exchange  agent, 
and  Mr.  Biddle  paid  the  planters  in  bank 
notes  which  the  Bank  could  furnish  with¬ 
out  limit,  while  he  received  in  Europe 
hard  money  for  the  cotton ;  this  aroused 
opposition. 

In  the  second  half  of  1837  he  established 
in  Missouri,  Arkansas,  Alabama,  Georgia, 
and  Louisiana  a  number  of  new  banks,  to 
make  advances  to  the  planters,  and  to  sell 
their  products  for  them  in  Europe.  They 
started  with  very  slight  capital,  they  ob¬ 
served  no  rules  in  issuing  paper,  their 
bank  notes  fell  30  per  cent,  in  1838.  and 
the  planters  would  not  take  them. 


70 


A  Brief  History  of 


The  Bank  of  the  United  States,  fearing 
lest  foreign  capitalists  should  take  advan¬ 
tage  of  the  difficulties  of  the  planters  by 
buying  this  cotton,  cheapened  on  account 
of  the  encumbrances  upon  the  district  pro¬ 
ducing  it,  resolved  to  come  to  the  rescue  of 
the  Southern  banks,  and  to  join  them  in 
their  operations  by  purchasing  their  shares 
and  their  long-time  paper,  having  two 
years  to  run.  It  thus  put  $100,000,000 
into  the  business,  and  in  1838  it  had  loaned 
them  upon  their  cotton  crops  not  less  than 
$20,000,000  at  7  per  cent.,  payable  in  three 
years. 

It  had  bought  the  bank  shares  at  28  per 
cent,  below  par;  through  its  help  they 
had  risen  again  to  par ;  and  then  it  threw 
them  upon  the  London  market,  which  ab¬ 
sorbed  them.  In  order  to  explain  the  im¬ 
mense  credit  enjoyed  in  Europe  by  the 
United  States  and  their  banks,  we  must 
observe  that  the  extinguishment  of  the 
National  obligations  through  surplus  crops 
threw  a  false  light  upon  the  credit  of  the 
States,  as  well  as  particularly  upon  that  of 
the  corporation.  For  many  years  Amer- 


Panics  in  the  United  States .  71 

ican  investments  had  been  sought  for 
above  all  others  in  London,  and  as  nothing 
happened  during  the  first  year  to  destroy 
that  confidence,  the  amount  thus  employed 
increased  from  $150,000,000  to  $200,000,- 
000  in  1840.  In  Pennsylvania  $16,000,000 
of  European  money  was  used  in  the  Bank 
of  the  United  States,  and  $40,000,000  in 
those  of  the  different  States,  all  of  which 
was  payable  in  two  or  three  years. 

Mr.  Biddle  had  succeeded  in  sustaining 
the  different  States  with  the  National  cre¬ 
dit.  He  knew  how  to  utilize  the  credit  of 
American  goods  in  Europe,  and  drew  from 
the  London  market  an  immense  sum 
against  exchange  long-time  paper  and 
paper  payable  in  America.  The  Bank’s 
paper  fell  from  4  to  6  per  cent.,  and  it  was 
in  such  demand  that  the  Bank  of  England 
took  it  at  2  to  3  per  cent,  discount.  But 
finally  the  market  had  all  that  it  could 
take.  The  attention  of  merchants  was  at¬ 
tracted  to  Mr.  Biddle’s  gigantic  specula¬ 
tions,  who  paid  paper  in  America  and  col¬ 
lected  hard  money  in  London.  Business 
interests  complained  about  the  contraction 


72 


A  Brief  History  of 


in  the  market.  The  Bank’s  stock  of  cot¬ 
ton  increased  steadily,  and  between  June 
and  July  it  rose  from  fifty-eight  to  ninety 
million  bales. 

This  speculation  had  already  yielded 
$15,000,000  profit,  but  the  market  was 
overloaded,  and  quotations  could  not  keep 
up.  The  planters  had  made  a  great  deal 
by  the  advance  in  cotton,  but  the  paper 
money  remitted  them  lost  from  15  to 
25  per  cent.  A  panic  was  approach¬ 
ing.  The  cotton  crop,  amounting  to 
400,000  bales,  was  one  fifth  less  than  was 
expected ;  they  awaited  an  advance  in 
price,  but  the  contrary  occurred.  The  high 
prices  had  brought  out  all  the  stored  cot¬ 
ton  ;  the  factories  had  reduced  their  work. 
Nevertheless  bale  after  bale  was  forwarded 
to  Liverpool  and  to  Havre.  The  sale  in 
this  last  port  in  February  and  March,  1839, 
having  produced  a  loss,  they  continued  to 
store  it.  As  soon  as  Mr.  Biddle  was  aware 
of  this  stoppage  he  sought  to  hide  the  dif¬ 
ficulty  by  extending  his  business.  He  pro¬ 
posed  to  start  a  new  bank  in  New  York 
(the  other  had  headquarters  in  Philadel* 


Panics  in  the  United  States .  73 

phia)  with  a  capital  of  $50,000,000.  He 
once  more  issued  long-time  paper,  and 
bought  with  American  paper  canals,  rail¬ 
roads,  and  shares  which  he  threw  upon  the 
English  market.  This  lasted  until  the 
long-time  paper  lost  18  per  cent,  in 
America,  and  until  American  exchange  and 
investments  were  no  longer  received  on  the 
Continent. 

The  Parisian  house  of  Hottinguer  like 
its  other  agents,  sold  little  until  the  first  of 
July,  and  when  it  saw  that  the  effort  to 
monopolize  cotton  could  not  succeed,  fear¬ 
ing  to  continue  this  gigantic  operation,  it 
declared  that  it  employed  too  much  capital. 
In  the  midst  of  all  this,  some  new  bills  of 
exchange  reached  Paris  without  consign¬ 
ment  of  corresponding  value ;  and  the  house 
of  Hottinguer  protested. 

Hope  of  Amsterdam  discontinued  his 
connection.  The  London  agent  called  upon 
the  Bank  of  England  for  help,  which  was 
granted  upon  the  guaranty  of  certain  firms 
of  that  place  and  a  deposit  of  good  Ameri¬ 
can  paper. 

Rothschild  accepted  the  refused  bills  of 


74 


A  Brief  History  of 


exchange,  after  having  found  out  that  a 
sum  of  £400,000  would  suffice  for  Mr.  Bid¬ 
dle’s  agent ;  these  £400,000  offered  as  a 
guaranty  consisted  of  Government  stock, 
and  of  shares  in  railroads,  canals,  and  banks. 
This  agreement  was  not  given  out  freely, 
which  still  further  increased  the  feeling  of 
distrust.  A  crisis  in  which  $150,000,000 
of  European  capital  were  destined  to  be 
engulfed  was  rapidly  approaching. 

Breaking  out  of  the  Panic  of  1839. — The 
English  papers  had  already  warned  the 
people  to  be  distrustful.  The  Times  said 
it  was  impossible  to  have  any  confidence  in 
the  Bank  as  long  as  it  would  not  resume 
specie  payments.  Mr.  Biddle  defended 
himself  through  papers  paid  for  the  pur¬ 
pose,  finally  in  the  Augsburg  Gazette, 
while  he  waited  for  the  soap  bubble  to 
burst.  His  retained  defenders  claimed  that 
the  150,000  bales  of  cotton  sent  to  Europe 
had  not  been  sold,  but  received  on  com¬ 
mission.  Advances  in  paper  had  been 
made  which  in  the  month  of  August,  1839, 
were  to  be  paid  in  notes  by  the  Southern 
banks,  for  a  new  grant  made  to  the  Bank 


Panics  in  the  United  States .  75 

by  the  State  of  Pennsylvania  permitted  it 
to  buy  the  shares  of  other  banks,  and  by 
this  means  to  gain  their  management; 
their  notes  lost  20  to  50  per  cent,  as  com¬ 
pared  with  the  Northern  banks. 

Through  his  profit  upon  the  difference  of 
the  notes,  and  through  the  payment  for  the 
cotton  in  paper,  and  through  the  sale  of 
bullion  exchange,  Mr.  Biddle  had  made  five 
to  six  million  dollars,  which  lay  at  his  com¬ 
mand  in  London. 

The  protection  of  his  bills  of  exchange 
made  a  great  impression  in  England ;  the 
rebound  was  felt  in  America,  where  the 
panic,  moderated  in  1837  through  the  in¬ 
tervention  of  the  Bank,  burst  forth  with 
renewed  fury  in  1839,  and  brought  about 
the  complete  liquidation  of  that  establish¬ 
ment. 

At  the  same  time  the  English  market 
was  very  much  pressed,  for,  according  to  a 
notice  of  the  Chamber  of  Commerce,  the 
number  of  that  year’s  bankruptcies  was 
greater  than  usual.  From  June  11,  1838 
to  June,  1839,  there  were  306  bankruptcies 
in  London,  and  781  in  the  “provinces,” — in 


?6 


A  Brief  History  of 


all,  1,087.  At  Manchester  there  were  82,  at 
Birmingham  54,  at  Liverpool  44,  at  Leeds 
33.  The  London  Exchange  was  flooded 
with  unsalable  paper,  an  occurrence  which 
had  also  taken  place  on  a  smaller  scale  in 
1837. 

Such  was  the  interruption  of  business 
that  interest  for  money  rose  to  20  per  cent., 
and  the  discount  rate  for  the  best  paper  to 
15  or  18  per  cent. 

The  various  States  in  the  Union  had 
contracted  debts  with  inconceivable  ease, 
and  interest  payments  were  provided  for 
by'  new  loans.  President  Jackson  de¬ 
clared  it  necessary  to  make  a  loan  in  order 
to  pay  interest  moneys.  It  was  deemed 
inexpedient  to  impose  new  taxes  to  pro¬ 
vide  for  the  cost  of  the  public  works. 
Great  was  the  embarrassment  in  America, 
and  as  no  more  money  came  from  England, 
it  was  necessary  for  the  Americans  to  look 
for  it  in  their  own  country. 

Business  circles  were  flooded  with  long¬ 
time  paper  running  at  a  discount  of  one 
half  of  1  per  cent,  a  month.  Discount 
rose  to  25  per  cent.  The  panic  was  so 


Panics  in  the  United  States .  77 

great  that  all  confidence  was  destroyed. 
The  Bank  of  the  United  States,  in  order 
to  maintain  its  credit,  paid  its  depreciated 
long-time  paper. 

The  struggle  between  the  Bank  and  its 
opponents,  led  by  President  Van  Buren, 
re-commenced.  These  last  declared  that 
the  Bank  had  erred  in  circulating  the 
$4,000,000  of  notes  of  the  old  bank,  which 
should  have  been  retired  coincidently  with 
the  charter ;  and  the  Senate  forbade  their 
circulation. 

The  Government  claimed  large  sums 
from  the  Bank,  the  statement  of  which 
showed  close  to  $4,000,000 ;  and,  as  it 
could  not  secure  this  amount  in  money,  it 
was  decided  to  issue  $10,000,000  of  Treas¬ 
ury  bonds.  The  Bank  party  wished  to 
push  the  Government  into  bankruptcy,  in 
order  to  induce  it  to  turn  to  them  for  help, 
and,  through  the  issue  of  “  circular  specie,” 
oblige  it  to  adopt  a  system  of  paper  money. 

A  bill  was  brought  forward  with  this 
view.  Biddle,  who  wished  to  increase  the 
circulation,  said  he  could  resume  specie 
payments,  and  thus  forced  his  shares  to 


78 


A  Brief  History  of 


rise ;  but  the  rejoicing  of  the  Bank  party 
was  soon  disturbed  by  the  fact  that  col¬ 
lectors  of  taxes  were  forbidden  to  receive 
any  bank  note  for  less  than  $20,  which 
was  not  redeemable  in  hard  money. 

After  a  struggle  of  eight  years  the  sep¬ 
aration  became  complete,  and  the  adminis¬ 
tration  of  National  finances  was  withdrawn 
from  the  Bank. 

In  1836,  a  law  was  passed  providing 
that  upon  the  expiration  of  its  charter,  the 
National  funds  should  be  again  deposited 
with  it,  as  soon  as  the  Bank  resumed  specie 
payment.  Upon  the  suspension  in  1837, 
the  Government  was  forced  to  abate  the 
law,  in  order  to  protect  the  specie,  and  im¬ 
posed  on  its  financial  and  postal  agents 
some  of  the  duties  of  the  Treasury.  In 
1840,  the  management  of  the  public  Treas¬ 
ury  constituted  a  separate  and  distinct  de¬ 
partment.  Such  was  the  liquidation  fol¬ 
lowing  the  panic,  that  Congress  granted 
the  Bank  three  months  in  which  it  must 
either  resume  specie  payment  or  liquidate. 
To  conform  to  this  decree  the  State  of 
Pennsylvania  fixed  the  resumption  of 


Panics  in  the  United  States .  79 

specie  payments  by  its  banks,  for  January 
15,  1841.  The  shares  of  the  Bank,  which 
had  yielded  no  dividend  in  1839,  and 
offered  a  similar  outlook  for  the  first  half 
of  1840,  fell  to  $61.  They  had  been 
quoted  as  high  as  $1,500.  General  liqui¬ 
dation  and  a  loss  of  50  per  cent,  was  in¬ 
evitable.  This  occurred  in  1841.  Thus 
ceased  for  a  time  the  bank  mania  in  the 
United  States. 

We  will  recall  here  Buchanan’s  opinion 
about  the  Bank:  “If  the  Bank  of  the 
United  States,  after  ceasing  to  be  a 
national  bank,  and  obtaining  a  new 
charter  in  Pennsylvania,  had  restrained 
itself  to  legitimate  banking,  had  used  its 
resources  to  regulate  the  rate  of  home  ex¬ 
change,  and  had  done  everything  to  hasten 
the  resumption  of  specie  payments,  it 
would  have  resurrected  the  National  Bank. 

“  But  this  is  no  longer  possible  ;  it  has 
defied  Congress,  violated  the  laws,  and  is 
mixed  up  in  politics.  The  people  have 
recognized  the  viciousness  of  its  adminis¬ 
tration  ;  the  President,  Mr.  Biddle,  has 
concluded  the  work  Jackson  began.” 


8o 


A  Brief  History  of 


Tables  indicating  the  banks  which  sus¬ 
pended  during  the  panic  :  In  1814,  90  ;  in 
1830,  165  ;  in  1837,  618  ;  in  1839,  959. 

The  last  panic,  from  1837  to  1839,  pro¬ 
duced,  according  to  some  pretty  accurate 
reports  of  1841,  33,000  failures,  involving 
a  loss  of  $440,000,000. 

Panic  of  1848. — The  entire  discounts, 
which  had  risen  to  $525,000,000  in  1837, 
fell  to  $485,000,000  in  1838,  only  to  rise 
again  to  $492,000,000  in  1839,  and  the 
real  liquidation  of  the  panic  occurred  only 
then.  Discounts  fell  at  once  to  $462,000,- 
000,  then  $386,000,000  ;  the  abundance  of 
capital,  and  the  low  price  at  which  it  was 
offered,  cleared  out  bank  paper  until  it 
was  reduced  from  $525,000,000  to  $254,- 
000,000  in  1843.1 

The  metallic  reserve  increased  from 
$37,000,000  to  $49,000,000  (1844);  the 
circulation  was  reduced  from  $149,000,000 
to  $58,000,000. 

The  number  of  banks  in  1840,  from  901 
fell  to  691  in  1843,  and  the  capital  itself 

1  We  have  not  the  outside  figures,  the  maximum  or  mini¬ 


mum. 


Panics  in  the  United  States. 


8 1 


from  $850,000,000  in  1840  was  reduced  to 
$200,000,000  in  1845  and  to  even  $196,- 
000,000  in  1846. 

All  these  figures  clearly  indicate  liquida¬ 
tion.  The  market,  freed  from  its  exchange, 
was  enabled  to  permit  affairs  to  resume 
their  ordinary  course. 

In  fact  an  upward  movement  was  taking 
place.  Discounts  rose  from  $264,000,000 
to  $344,000,000  in  1848. 

Banks  increased  from  691  in  1843  to 
751  in  1848,  and  their  capital  grew  from 
$196,000,000  in  1846  to  $207,000,000. 
The  paper  circulation  rose  from  $58,000,- 
000  to  $128,000,000  in  1848.  Deposits 
from  $62,000,000  reached  $103,000,000  in 
1848.  The  metallic  reserve  alone  fell  from 
$49,000,000  in  1844  to  $35,000,000  in 
1848. 

The  consequences  of  the  European  panic 
were  felt  in  America,  but  without  causing 
much  trouble.  The  liquidation  of  the 
panic  of  1839  was  barely  over,  and  was 
still  too  recent  to  have  permitted  sufficient 
extension  of  business 

Embarrassments  were  slight  and  brief ; 


82 


A  Brief  History  of 


discounts,  nevertheless,  fell  from  $344,000,- 
000  to  $332,000,000. 

The  store  of  bullion,  in  spite  of  the  sur¬ 
plus  and  the  favorable  balance  produced 
by  the  export  of  grain  to  Europe,  fell  from 
$49,000,000  to  $35,000,000 ;  with  the  fol¬ 
lowing  year  the  forward  movement  recoin- 
menced. 

Panic  in  1857. — The  stoppage  in  1848 
was  very  brief.  Discounts  rose  regularly 
from  $332,000,000  to  $364,000,000,  $413,- 
000,000,  $557,000,000,  $576,000,000,  $634,- 
000,000,  and  finally  $684,000,000  in  1857. 
The  progression  was  irresistible.  The  cir¬ 
culation  rose  from  $114,000,000  to  $214,- 
000,000.  The  banks  increased  at  such  a 
rate  that,  from  707  in  1846,  with  a  capital 
of  $196,000,000,  there  were  in  1857  1416, 
whose  capital  had  risen  to  $370,000,000, — 
a  very  inferior  figure,  in  comparison  to  the 
number  of  banks,  to  that  of  1840,  when 
901  banks  only  had  a  capital  of  $358,- 
000,000. 

The  metallic  reserve,  from  $35,000,000 
in  1847,  easily  reached  $59,000,000  in 
1856:  but  it  was  in  proportion  neither 


Panics  in  the  United  States .  83 

with  the  number  of  the  banks  nor  their 
discounts  and  circulation  ;  and,  after  all, 
this  is  only  a  moderate  sum.  We  have 
not  the  extreme  maximum  or  minimum, 
and  the  suspension  of  specie  payments 
took  place  notwithstanding  the  amount  of 
cash  on  hand,  which  was  greater  in  1857 
than  in  1856. 

Deposits  accumulated  from  $91,000,000 
to  $230,000,000  ;  they  rose  to  their  greatest 
height  in  the  very  year  of  the  crisis ;  never¬ 
theless,  they  could  not  be  drawn  out. 

During  the  Eastern  war  the  prosperity 
of  the  United  States  had  been  so  great 
that  the  clearing-houses  established  in  New 
York  in  1853,  and  in  Boston  in  1855, 
offered  only  a  slight  opposition  to  the 
excessive  issue  :  at  least,  in  1837  the  Con¬ 
gressional  report  stated  the  cash  on  hand 
was  $6,500,000 — that  is  to  say,  $1.00  in 
metal  to  each  $6.00  in  paper. 

In  1857  cash  on  hand  was  $14,300,000,  or 
$1.00  in  hard  money  for  each  $8.00  in  paper. 

The  banks  had  attracted  deposits  by 
high  interest,  and  loaned  the  money  to 
wild  speculators.  On  the  22d  of  August, 


84 


A  Brief  History  of 


1857,  the  amount  of  loans  had  become  al¬ 
most  $12,000,000,  counting  together  metal, 
notes,  and  deposits. 

From  December,  1856,  to  June,  1857, 
they  had  shown  great  strength.  Discounts 
had  risen  from  $183,000,000  to  $190,000,- 
000  in  June  ;  cash  on  hand  had  risen  from 
$11,000,000  to  $14,000,000.  The  only  evi¬ 
dence  of  weakness,  so  to  speak,  was  that 
the  withdrawal  of  deposits  had  risen  from 
$94,000,000  to  $104,000,000,  while  the  cir¬ 
culation  diminished  $1,000,000. 

In  June  “the  position  of  the  Bank  ought 
not  to  have  caused  any  fear,  to  the  most 
far-sighted,”  says  the  report  of  the  Com- 
.  mittee  of  Inquiry. 

Foreign  exchange  was  favorable,  and  it 
is  known  that  is  the  bankers’  guide.  June, 
July,  and  August  were  tranquil,  except  for 
a  slight  disturbance  in  business  experi¬ 
enced  by  the  country  bankers  through  the 
constantly  increasing  amount  of  notes  pre¬ 
sented  for  redemption,  and  among  the  city 
bankers  by  requests  for  discount. 

The  collapse  of  the  “  Ohio  Life,”  which 
had  the  best  New  York  connection,  was 


Panics  in  the  United  States ..  85 

the  first  muttering  of  the  storm,  and 
was  soon  followed  by  the  suspension  of 
the  Mechanics’  Banking  Association,  one 
of  the  oldest  banks  in  the  country.  The 
suspension  of  the  Pennsylvania  and  Mary¬ 
land  banks  followed.  Public  confidence 
remained  unshaken  —  it  relied  upon  the 
circulating  medium. 

Only  one  bank  went  to  protest,  and  that 
on  September  4th,  on  a  $250  demand.  An¬ 
other  protest  followed  on  the  12th,  a  third 
on  the  15th,  both  for  insignificant  amounts. 
Demands  in  the  way  of  withdrawal 
amounted  to  almost  nothing,  and  there 
was  nothing  like  a  panic. 

The  deposits  at  the  savings  banks  were 
a  little  less,  but  this  did  not  continue. 
Only  at  the  close  of  September  was  the 
demand  by  the  country  banks  for  payment 
upon  the  Metropolitan  American  Exchange 
Bank  for  payment  greater  than  it  had  ever 
been. 

On  the  13th  of  October,  with  exchange 
at  par,  an  abundant  harvest,  with  a  pre¬ 
mium  of  \  to  \  per  cent,  on  metal,  the 
banks  suspended  specie  payment,  but 


86 


A  Brief  History  of 


resumed  it  on  the  11th  of  December.  The 
most  critical  period  lasted  about  a  month. 
The  first  step  towards  resumption  of  pay¬ 
ments  was  made  after  the  resolution 
adopted  by  the  Committee  of  Liquida¬ 
tion  to  call  upon  the  country  banks  to  re¬ 
deem  the  notes  of  the  Metropolitan  Bank, 
paying  an  allowance  of  ^  of  1  per  cent,  in¬ 
terest,  running  from  the  20th  of  November. 

At  this  time  the  city  bankers  held,  in 
bills  issued  and  in  signed  parcels  of  $5,000 
each,  about  $7,000,000  due  by  the  country 
banks.  They  were  thus  enabled  to  accom¬ 
plish  the  payment  of  their  notes  at  the 
rate  of  20  per  cent,  a  month  by  the  1st  of 
January,  1858.  The  same  favor  of  repay¬ 
ing  their  notes  at  the  rate  of  6  per  cent, 
was  granted  to  the  city  banks. 

We  need  not  inquire  if,  having  granted 
this  delay,  the  banks  proved  their  liber¬ 
ality.  The  abundant  harvest  also  assisted 
liquidation. 

From  1853  to  1857  the  metallic  reserve 
fell  to  $7,000,000,  deposits  rose  to  $99,- 
000,000,  and  discounts  and  loans  to  $122,- 
000,000. 


Panics  in  the  United  States.  87 

BANKS  OF  NEW  YORK. 


Proportion 

Metallic  Reserve. 

Deposits. 

Discounts, 

Advances. 

of  the  Me¬ 
tallic  Re¬ 

serve  to 

Deposits, 

I854. 

.  .  .$15,000,000 

$  58,000,000 

$  80,000,000 

26  % 

1855. 

. . .  9,900,000 

85,000,000 

101,000,000 

II  % 

1856. 

. . .  10,000,000 

100,000,000 

112,000,000 

IO  % 

1857. 

. . .  7,000,000 

99,000,000 

122,000,000 

7  % 

The  reduction  of  the  metallic  reserve, 
increase  of  deposits  and  of  discounts  and 
of  advances,  are  here  clearly  indicated. 

From  1853  to  1857  the  bank  circulation 
hardly  varied  $100,000,  indicating  that  the 
demand  for  hard  money  came  from  abroad 
and  from  the  interior.  The  circulation  was 
not  the  cause  of  the  suspension, — at  least 
such  was  the  opinion  expressed  by  the 
superintendent  of  the  New  York  banks  in 
his  report. 

In  1856  twenty-five  companies  were 
started,  and  three  bankers  opened  business 
with  a  capital  of  $7,500,000,  of  which 
$7,200,000,  was  paid  in. 

In  1857  there  were  only  five  of  these 
banks  and  three  bankers  having  a  capital 
of  $6,000,000,  of  which  only  $4,000,000 
were  paid  in.  The  collateral  deposited  by 
the  banks  represented  $2,500,000  in  1856, 


88  A  Brief  History  of 

on  which  credit  of  $2,000,000  in  notes  was 
granted. 

In  1857  the  same  collateral  did  not  ex¬ 
ceed  $560,000  estimated  value,  on  which 
a  credit  of  $383,000  in  paper  was  granted. 

At  the  height  of  the  crisis  failures  were 
so  numerous  that  a  general  suspension  of 
payments,  and,  in  consequence,  a  stoppage 
of  business  was  dreaded.  This  suspension, 
in  place  of  being  general,  turned  out  to  be 
merely  partial ;  it  occurred  at  a  juncture 
when  it  might  well  be  feared  that 
it  would  lead  on  to  the  very  greatest 
disasters,  but,  far  from  harming,  it  helped 
the  market.  The  banks  had  suspended 
payment  upon  a  common  understanding 
among  themselves  and  with  business  circles. 
The  critical  moment  having  passed,  tran¬ 
quillity  reappeared  as  soon  as  the  course 
determined  on  was  known. 

If  suspension  of  payment  hurts  the  credit 
of  a  bank,  it  does  not  necessarily  lead  to 
the  depreciation  of  its  bank  notes. 

There  are  a  good  many  proofs  of  this:  in 
1796,  when  the  Bank  of  England  suspended, 
its  bank  notes  did  not  depreciate ;  and  if 


Panics  in  the  United  States.  89 

this  state  of  things  did  not  last,  the  blame 
must  be  laid  upon  the  excessive  issue. 
And  in  France,  in  1848  as  well  as  in  1871, 
the  Bank  of  France  suspended  without  the 
depreciation  of  its  bank  notes  becoming 
very  noticeable.  So,  in  New  York,  bank 
notes  passed  at  2  or  3  per  cent,  loss  at  this 
crisis. 

The  crisis  disappeared  with  the  end  of 
the  year,  and  resumption  of  payments  took 
place  between  New  York  and  Hamburg, 
with  the  return  of  specie  and  a  rate  of  4 
per  cent. 

It  was  the  same  in  France  and  England. 
A  more  serious  panic  and  a  more  rapid 
recovery  had  never  been  seen.  The  rigid¬ 
ness  and  not  the  severity  of  the  pressure 
that  had  to  be  exercised  shows  the  condi¬ 
tion  of  business.  There  had  been  most 
blamable  practices  employed  ;  but  the 
market  as  a  whole  was  sound,  and  had 
faced  the  storm. 

Only  four  banks  had  suspended,  three 
of  which  were  shaky  before  the  panic,  and 
the  fourth  had  already  resumed  payments. 

At  no  other  period  could  one  have  ob- 


9o 


A  Brief  History  of 


tained  such  an  amount  of  credit  upon  a 
simple  paper  circulation;  fictitious  paper 
was  the  source  of  all  the  wrecks.  To  get 
it  into  circulation  the  most  varied  contri¬ 
vances  were  resorted  to,  and  fraud  itself 
was  not  wanting ;  the  signatures  even  be¬ 
came  fictitious,  their  owners  could  not  be 
found.  Shams  and  discriminations  under 
all  forms,  designed  to  permit  speculation 
without  capital,  without  exchange  of  goods, 
without  real  transactions  between  the 
drawer  and  the  acceptor  of  the  bill  of 
exchange,  were  rife. 

In  his  message,  President  Buchanan 
ascribed  the  crisis  to  the  vicious  system  of 
the  fiduciary  circulation,  and  to  the  ex¬ 
travagant  credits  granted  by  the  banks, 
although  he  was  aware  that  Congress  had 
no  power  to  curb  these  excesses.  AVhen 
there  is  too  much  paper,  when  the  public 
has  created  an  endless  chain  of  bank  notes, 
representing  no  real  value,  it  is  enough  that 
the  first  ring  break  for  the  whole  gear,  thus 
no  longer  held  together,  to  fall  to  pieces. 

If  we  mark  the  situation  of  the  New 
York  banks  before  and  during  the  panic — 


Panics  in  the  United  States .  91 

that  is  to  say,  in  1852  and  in  1857,  we  will 
ascertain  as  follows : 


June,  1852.  June,  1856.  June,  1857. 

Capital . $  59,700,000  $  92,300,000  $107,500,000 

Circulation .  27,900,000  30,700,000  27,100,000 

Deposits .  65,600,000  96,200,000  84,500,000 

Paper  discounted  127,000,000  174,100,000  170,800,000 

Cash  on  hand...  13,300,000  18,500,000  14,300,000 


This  table  demonstrates  that  two  items 
show  a  great  increase :  capital  increased 
$47,000,000  and  paper  discounted  $43,000- 
000 ;  while,  in  face  of  an  increase  of 
$1,000,000  of  specie  on  hand,  the  note  cir¬ 
culation  decreased  $800,000. 

Far  from  finding  a  mistake,  we  find  a 
proof  of  the  Directors’  prudence.  If  there 
was  an  error  in  the  issuing  of  paper,  it  was 
not  on  the  side  of  the  banks ;  it  was  the 
public  itself  that  was  chiefly  in  fault. 

We  find  the  causes  of  the  panic  in  the 
issues  of  railway  obligations  and  shares, 
which  had  chiefly  been  placed  in  European 
markets,  and  whose  gross  amount  was 
estimated  at  £  1,000, 000.  The  speculation 
in  land  and  railroads  had  been  carried  on 
either  with  borrowed  money  or  by  open 
credits,  and  by  accommodation  notes,  back 
of  which  there  was  no  second  party. 


92 


A  Brief  History  of 


The  mistake  of  the  banks  was  in  trying 
to  conduct  their  whole  business  by  their 
note  circulation  and  to  concentrate  their 
capital  in  the  bank  offices,  and  meanwhile, 
as  they  refused  to  loan  to  the  stockholders 
of  the  banks,  discounts  in  New  York  fell 
off  $10,000,000.  Finally  the  capital  could 
not  be  entrusted  to  the  disposal  of  the 
banks  and  it  was  necessary  to  compel  them 
to  make  a  deposit  of  $100,000  for  each  as¬ 
sociation,  and  $50,000  for  each  banker. 

Such  were  the  final  advices  given  by  the 
inspector-general  of  the  banks  of  New 
York  at  the  close  of  his  report,  dealing  with 
how  to  prevent  the  recurrence  of  panics. 
To  have  confidence  in  their  efficacy,  it  was 
necessary  to  forget  the  past  and  its 
lessons. 

The  reforms  already  made  and  those  still 
asked  for  in  the  bank  system  could  yield 
no  remedy  for  those  abuses  lying  beyond 
legislative  action.  The  American  news¬ 
papers  did  not  hesitate  to  demand  them, 
well  aware  that  they  would  produce  no 
effect;  however,  they  congratulated  them¬ 
selves  with  having  drawn  away  from  effete 


Panics  in  the  United  States .  93 

1 

Europe  one  million  sterling  now  realized 
upon  the  soil  of  the  United  States  without 
any  equivalent  given  for  it  to  the  foreign 
lenders. 

Panic  of  1864. — The  crisis  of  1864  was 
mixed  up  in  Ihe  United  States  with  the 
War  of  Secession  ;  it  was  a  political  crisis, 
and  is  not  properly  to  be  considered  here. 

Panic  of  1873. — During  the  last  two  months 
of  1872  the  American  market  had  been  very 
much  embarrassed  ;  the  lowest  rate  of  dis¬ 
count  was  7  per  cent.,  and  in  December 
it  was  quoted  at  even  of  1  per  cent,  or 
a  quarter  of  1  per  cent,  a  day  ! 

The  year  1873  was  anxiously  awaited  in 
hope  of  better  times.  In  the  middle  of 
January,  1873,  the  rate  of  interest  declined 
a  little  to  6  or  7  per  cent.,  but  soon 
the  rate  of  of  1  per  cent,  per  day  re¬ 
appeared  and  continued  until  the  month 
of  May. 

In  the  first  days  of  April  the  market  was 
in  full  panic ;  it  grew  steadier  in  the  first 
week  of  May,  and  in  the  month  following. 
It  relapsed  on  September  1st,  and  requests 
for  accommodation  redoubled  until  the 


94 


A  Brief  History  of 


sharpest  moment  of  the  panic.  On  that  day 
there  were  no  cpioted  rates ;  money  could 
not  be  had  at  any  price :  some  few  loans 
were  made  at  1^  per  cent,  per  day. 

This  panic  broke  forth  on  September 
18th,  through  the  failure  of  Jay  Cooke, 
after  a  miserable  year,  during  which  money 
was  constantly  sought  for  and  was  held  at 
very  high  prices  in  all  branches  of  business. 
As  to  the  loans  for  building  railroads,  they 
followed  one  another  so  rapidly  that,  from 
the  month  of  October,  1871,  to  the  month 
of  May,  1873,  they  could  not  be  placed  at 
a  lower  rate  than  7  per  cent.  Bankers 
succumbed  beneath  the  burden  of  their  un¬ 
salable  issues.  This  was  a  grave  misfor¬ 
tune  for  the  railroads.  In  the  single  year 
1873  there  were  constructed  4,190  miles  of 
railroad  in  the  United  States,  which,  at 
§29,000  per  mile,  represented  the  enormous 
sum  of  §121,000,000,  and  in  the  last  five 
years  §1,700,000,000. 

The  commercial  situation  was  not  so 
bad,  and  the  number  of  failures  did  not 
reach  the  proportion  that  might  have  been 
feared. 


Panics  in  the  United  States .  95 

After  the  failure  of  Jay  Cooke  came 
those  of  Fiske  &  Hatch,  of  the  Union  Trust 
Company,  of  the  National  Trust  Company, 
and  of  the  National  Bank  of  the  Common¬ 
wealth.  On  the  20th  of  September,  for 
the  first  time,  the  Stock  Exchange  in  New 
York  City  was  closed  for  ten  days,  during 
which  legal-tender  notes  were  at  a  pre¬ 
mium  of  J  per  cent,  to  3  per  cent,  above 
certified  cheques. 

On  the  18th  there  was  a  run  on  the 
deposits.  Withdrawals  continued  on  the 
19th  and  20th,  especially  by  the  country 
banks,  and  the  banks’  correspondents.  No 
security  could  be  realized  upon ;  and  in 
order  to  relieve  the  situation  the  Secretary 
of  the  Treasury  bought  $13,500,000  of 
National  5-20  bonds,  stating  that  he  could 
do  no  more. 

The  New  York  Stock  Exchange  was 
reopened  September  30th,  without  any 
notable  occurrence;  but  everything  was  very 
low.  Several  other  suspensions  occurred — 
for  instance,  that  of  Sprague,  Claflin,  &  Co. 

The  rate  of  discount  being  9  per  cent., 
a  panic  was  feared  in  London.  The  banks 


96 


A  Brief  History  of 


passed  the  most  critical  period  on  October 
14th;  out  of  $32,278,000  legal-tender  dol¬ 
lars  at  the  beginning  of  the  panic,  only 
$5,800,000  remained  on  hand.  Not  until 
the  middle  of  November  did  the  decline 
stop  and  a  slight  advance  take  place. 

Throughout  the  panic  the  bank  reserves 
were  much  below  the  legal  requirement  of 
25  per  cent. ;  from  the  13th  to  the  20th  of 
September  they  fell  to  24.44  and  23.55  per 
cent. 

The  New  York  Clearing  House  in  Sep¬ 
tember  adopted  a  measure  which  permitted 
dealings  to  continue.  It  authorized  the 
banks  to  deposit  the  bills  on  hand,  or  the 
other  securities  they  had  accepted,  in  ex¬ 
change  for  which  they  issued  certificates  of 
deposit  bearing  7  per  cent,  in  notes  of 
$5,000  to  $10,000  to  the  extent  of  70  per 
cent,  of  the  security  deposited.  Thus  $26,- 
565,000  of  them  were  put  into  circulation. 

Furthermore,  they  made  a  common  fund 
of  the  legal  tenders  belonging  to  the  Asso¬ 
ciated  Banks  for  mutual  aid  and  protection. 

The  suspension  of  payment  took  place 
first  in  New  York  and  then  extended  to  the 


Panics  in  the  United  States . 


97 


large  cities  of  the  Union ;  it  lasted  forty 
days,  until  the  1st  of  November;  this 
measure  was  looked  upon  as  having  pre¬ 
vented  the  greatest  disasters. 

The  table  setting  forth  the  situation, 
compared  with  the  balance  sheets  of  the 
Associated  Banks  of  New  York  on  January 
1st,  April  1st,  July  1st,  September  1st,  and 
October  1st  of  the  years  1870,  1871,  1872, 
and  1873,  shows  us  the  following  changes: 
discounts  had  fluctuated  from  $250,000,000 
in  January,  1870,  to  $309,000,000  in  Sep¬ 
tember,  1871 ;  they  had  become  reduced  to 
$278,000,000  in  September,  1873,  on  the 
eve  of  the  panic,  and  from  the  month  of 
September,  liquidation  of  the  panic  having 
begun,  they  were  reduced  to  $250,000,000. 
Deposits  from  $179,000,000  in  January, 
1870,  rose  to  $248,000,000  in  July,  1871, 
with  $296,000,000  of  bills  discounted,  and 
once  more  reached  $198,000,000  in  Septem¬ 
ber,  1873,  with  $278,000,000  of  discounts 
and  $195,000,000  in  December. 

Even  at  the  most  critical  moment  of  the 
panic  they  continued  larger  than  the  usual 
average  of  the  preceding  years. 


98 


A  Brief  History  of 


The  metallic  reserves  played  too  feeble  a 
role  to  have  caused  failure ;  they  had  varied 
from  §34,000,000  in  June,  1870,  to  §9,000,- 
000  in  September,  1871,  §18,000,000  in 
September,  1873,  and  §23,000,000  in  De¬ 
cember,  1873. 

The  circulation  varied  still  less :  from 
§34,000,000  in  January,  1876,  it  decreased 
to  §27,000,000  in  July,  1872,  and  remained 
at  the  same  figure  during  the  year  1873,  if 
we  can  judge  of  this  by  the  balance  sheet 
rendered  on  the  first  day  of  each  quarter. 
In  each  case  there  is  no  opportunity  for  us 
to  charge  an  excessive  issue. 

According  to  the  statement  of  the  Comp¬ 
troller  of  the  Currency,  paper  discounted 
decreased  between  the  12th  of  September 
and  the  1st  of  November  from  §199,000,000 
to  §169,000,000. 

To  sum  up,  the  circulation  had  fluctuated 
very  little ;  deposits  from  §99,000,000  had 
increased  to  §167,000,000  between  the  12th 
and  20th  of  September,  at  the  most  critical 
period  ;  and  when  suspension  was  universal, 
they  had  declined  to  §89,000,000.  After 
the  breaking  out  on  the  18th  of  October, 


Panics  in  the  United  States. 


99 


and  since  then  from  the  2 2d  of  November, 
they  had  risen  to  $138,000,000.  ' 

The  metallic  reserve,  after  a  brief  revival 
from  $14,000,000  to  $18,000,000  between 
the  12th  and  20th  of  September,  had  fallen 
back  to  $10,000,000,  only  to  rise  to  $14,- 
000,000  in  November. 

In  the  midst  of  these  difficulties,  the 
securities  of  the  various  States  held  up. 
Since  the  first  months  of  1873,  the  demands 
of  the  English  market  caused  an  upward 
movement  in  them;  in  September  it  was 
impossible  to  make  a  loan,  without  using 
them  as  collateral.  In  order  to  help  the 
market  somewffiat,  the  Treasury  bought 
about  $13,000,000  of  National  securities 
on  the  Stock  Exchange,  but,  lacking  re¬ 
sources,  that  was  the  only  effort  it  could 
make.  The  German  Government  invested 
quite  a  large  sum  in  the  new  five  per  cents, 
so  that  the  advance  in  public  securities 
lasted  through  the  whole  year :  the  market 
rate  for  5-20’s  advanced  from  91  per  cent, 
in  April  to  96  per  cent,  in  October,  in  the 
midst  of  the  market’s  panic. 

The  $15,000,000  of  indemnity  awarded  by 


IOO 


A  Brief  History  of 


the  Geneva  Court  of  Arbitration,  and  paid 
by  England  for  having  admitted  privateers 
into  her  ports,  was  put  into  5-20’s.  Apart 
from  this  strength  in  the  public  securities, 
tbe  railway  obligations,  especially  those 
upon  new  roads,  were  very  much  depressed ; 
they  could  no  longer  be  placed,  ninety  new 
companies  having  stopped  paying  their 
coupons,  whilst  those  of  the  old  lines  held 
their  quotations. 

Great  speculators,  Vanderbilt  at  the 
head,  formed  syndicates,  embracing  several 
companies,  and  made  prices  as  suited  their 
plans.  The  death  of  Mr.  Clarke  in  June 
dealt  the  first  blow  to  this  combination,  and 
the  failure  of  George  Bird  Grinnell  brought 
about  its  dissolution. 

9 

The  liquidation  of  this  tremendous  con¬ 
cern  kept  down  prices  for  a  long  time. 

The  price  of  gold,  still  quoted  at  112i 
per  cent,  in  January,  1873,  rose  to  119^  per 
cent,  in  April,  superinduced  by  speculation, 
for  at  the  height  of  the  panic  it  declined  to 
106  on  the  6th  of  November.  It  is  true 
that  at  that  time  all  doubtful  accounts  were 
liquidated,  and  demands  for  gold  had  dis- 


Panics  in  the  United  States . 


IOI 


appeared ;  if  we  were  to  rely  upon  the  ex¬ 
port  figures  only,  we  would  find  them  less 
than  in  the  preceding  years. 

Exchange  rates  were  much  more  de¬ 
pressed  ;  from  109.45,  representing  par,  they 
fell  to  107.25  for  the  best  60-day  paper. 
This  paper  was  much  sought  after  by  spec¬ 
ulators,  who,  when  discounting  it,  procured 
bonds  authorizing  them  to  transfer  the 
titles  unless  payment  was  made  promptly 
at  maturity.  Prices  fell  so  low  that  it  was 
often  impossible  to  negotiate  paper  at  any 
price.  The  activity  reigning  at  the  begin¬ 
ning  of  the  year  showed  itself  in  the  Ex¬ 
change  movement ;  the  excess  of  imports 
over  exports  rose  in  the  first  months  to 
$100,000,000,  whilst  in  the  preceding  year 
it  did  not  exceed  $62,000,000  ;  prices  ruling 
in  the  American  market  attracted  goods 
from  all  quarters. 

Panic  of  1884. — The  panic  which  burst 
upon  the  United  States  in  1884  was 
the  last  thunder-clap  of  the  commercial 
tempest  which  had  reigned  since  the  month 
of  January,  1882.  Public  opinion  already 
recalled  the  decennial  period  which  sepa- 


102 


A  Brief  History  of 


rated  the  existing  panic  from  that  of  1873. 
The  acute  period  was  of  short  duration ; 
the  crash  occurred  on  May  14th,  and  the 
decline  of  values  had  touched  bottom  by 
the  end  of  June.  From  the  9th  of  June 
the  people  began  to  steady  up,  they  felt 
the  ground  firmer  under  their  feet.  The 
situation  gave  evidence  of  great  strength ; 
and,  notwithstanding  the  dearness  of  money, 
and  an  enormous  fall  in  prices,  there  were 
only  a  few  failures,  and  at  the  close  of  the 
year  equilibrium  was  re-established,  al¬ 
though  the  liability  of  the  losses  had  risen 
to  $240,000,000.  These  losses,  it  is  true, 
were  almost  entirely  borne  by  financiers  and 
speculators,  rather  than  by  manufacturers 
and  traders. 

The  month  of  May,  1884,  concludes  the 
prosperous  period  which  followed  the  cri¬ 
sis  of  1873.  During  this  period  the  most 
gigantic  speculations  in  railroads  occurred ; 
the  zenith  of  the  movement  was  in  1880, 
and  as  early  as  1881  a  retrograde  move¬ 
ment  began,  only  to  end  in  the  disasters  in 
question.  The  decline  in  prices  had  been 
steady  for  three  years ;  they  had  sunk 


Panics  in  the  United  States.  103 

little  by  little  under  the  influence  of  a  ruin¬ 
ous  competition,  caused  by  the  number  of 
new  lines  and  the  lowering  of  rates,  but 
above  all  through  the  manipulations  by 
the  managers  on  a  scale  unexampled  until 
now.  In  connection  with  the  disasters  of 
May,  1884,  the  names  of  certain  speculators 
who  misused  other  people’s  money,  such  as 
Ward,  of  Grant  &  Ward;  Fish,  President 
of  the  Marine  Bank ;  and  John  C.  Eno,  of 
the  Second  National  Bank,  will  long  be  re¬ 
membered.  General  Grant,  who  was  a  silent 
partner  in  Ward’s  concern,  was  an  innocent 
sufferer,  both  in  fortune  and  reputation. 

The  Marine  Bank  suspended  on  the  5th 
of  May,  and  in  the  following  week  the 
Metropolitan  drew  down  in  its  train  a  large 
number  of  bankers  and  houses  of  the  sec¬ 
ond  order.  The  confusion  was  then  at  its 
height.  Owing  to  the  very  delicate  mech¬ 
anism  of  the  credit  circulation,  the  banks 
and  the  clearing  house  were  the  first 
attacked  and  the  most  shaken,  but  they 
immediately  formed  themselves  into  a  syn¬ 
dicate  to  resist  the  storm  which  was  upset¬ 
ting  all  about  them.  As  cheques  were  no 


104 


A  Brief  History  of 


longer  paid,  settlements  no  longer  took 
place,  and  the  credit  circulation  was  sus¬ 
pended  ;  this  stoppage  was  liable  to  in¬ 
duce  the  greatest  consequences,  hence  it 
was  necessary  to  be  very  circumspect. 
Here  it  was  not  possible  to  suspend  the 
law,  as  in  England  the  Act  of  1844  was 
suspended,  permitting  an  excess  of  the 
official  limit  for  the  note  issue,  but  the 
banks  could  have  been  empowered  to  de¬ 
mand  authority  to  change  the  proportion 
enacted  by  the  law  creating  National 
Banks.  They  had  no  recourse  to  any  of 
these  violations  of  the  Statutes,  which  prove 
only  too  often  under  such  circumstances 
that  regulation  by  law  is  impossible ;  they 
satisfied  themselves,  without  having  the 
public  powers  intervene,  with  issuing 
clearing-house  certificates,  that  is  to  say, 
promises,  which  they  were  bound  to  accept 
as  cheques  in  settling  up  the  operations  of 
each  day.  It  was  through  this  help  that 
the  Metropolitan  Bank  was  enabled  to  re¬ 
sume  payments  on  the  15th  of  May,  the 
evening  of  the  day  following  its  suspen¬ 
sion.  The  Second  National  Bank  was  a 


Panics  in  the  United  States . 


Jo5 

loser  through  the  acts  of  its  President,  Mr. 
J ohn  C.  Eno,  but  his  father  and  the  Directors 
hastened  to  make  good  the  deficit.  At 
this  moment  the  excitement  was  intense, 
deposits  were  withdrawn,  and  1  per  cent, 
a  day  was  paid,  and  even  more,  to  obtain 
ready  money  or  credit ;  under  the  influence 
of  numerous  sales  of  securities,  exchange 
fell  rapidly,  metallic  money  was  secured  in 
London  even,  to  be  hurried  to  New  York. 
Never  could  purchases  be  made  under  bet¬ 
ter  auspices.  Above  all  is  this  true  when 
we  observe  that  the  condition  of  companies 
was  much  better  known  than  in  1873. 

The  year  1883  had  been  disturbed  by 
numerous  failures.  There  had  been  no 
crash,  but  prices,  far  from  advancing,  had 
held  their  own  with  difficulty.  On  the  eve 
of  the  breaking  out  of  the  panic  there  was 
complaint  about  the  accumulation  of  goods 
in  the  warehouses,  and  of  the  difficulty  of 
making  exports.  No  scheme  worked  out, 
despite  a  very  high  protective  tariff,  and 
people  were  asking  themselves  what  was 
its  effect  under  the  influence  of  unfavorable 
exchanges.  Gold  flowed  away  from  the 


106  A  Brief  History  of 

country,  and  cash  on  hand  decreased  each 
day. 

On  the  1st  of  January,  1884,  the  New 
York  &  New  England  Railroad  was  placed 
in  the  hands  of  a  receiver  by  order  of  the 
court.  The  same  thing  happened  on  the 
12th  of  January  to  the  North  River  Com¬ 
pany.  In  February,  March,  and  April 
many  houses  exhibited  their  balance  sheets. 
The  fall  in  prices  grew  accentuated  not 
only  on  the  Stock  Exchange,  but  in  all 
markets.  The  discomfort  increased  until 
the  6th  of  May,  the  day  on  which  occurred 
the  failure  of  the  National  Marine  Bank, 
whose  President  was  associated  with  the 
house  of  Grant  and  Ward,  which  went 
down  shortly  afterwards  with  a  liability  of 
$17,000,000.  This  financial  disaster  made 
a  great  stir.  Anxiety  spread  everywhere, 
when  on  the  1 3th  of  May  the  President  of 
the  Second  National  Bank  of  New  York 
was  also  forced  to  suspend  payment  with  a 
liability  of  $3,000,000;  this  was  the  final 
blow  to  credit.  Every  operation  was  sus¬ 
pended,  all  exchange  became  impossible; 
not  securities  but  money  was  lacking.  At 


Panics  in  the  United  States .  107 

one  time  the  panic  was  such  that  the  rate  of 
discount  and  loans  rose  to  4  per  cent,  a  day  ! 

Although  the  panic  was  general,  it  was 
rather  a  panic  of  securities  in  the  chief 
places  of  the  United  States,  especially  in 
New  York. 

One  no  longer  knew  on  whom  to  count 
to  provide  ready  money.  Offerings  were 
made  on  the  Stock  Exchange  where  there 
were  no  bidders,  and  the  market  disap¬ 
peared  in  the  midst  of  a  panic  which  para¬ 
lyzed  every  one. 

This  melancholy  state  of  things  was  still 
further  aggravated  on  the  14th  of  May  by 
the  failure  of  Donnel,  Lawson,  &  Simpson 
and  Hatch  &  Foote.  On  May  15th  it  was 
the  turn  of  the  Savings  Banks  of  New 
York,  of  Fiske  &  Hatch,  and  of  many 
others.  It  was  impossible  to  obtain  any 
credit  from  the  banks,  and  all  securities 
were  unsalable,  unless  at  ruinous  rates. 
Reduced  to  such  an  extremity,  it  was 
necessary  to  adopt  some  course  to  help  the 
market  and  avoid  suspension  of  payments. 

The  certified  checks  issued  by  the  banks 
did  not  answer,  and  it  was  necessary  to 


1 08  A  Brief  History  of 

have  recourse  to  a  new  means  of  settlement. 
The  members  of  the  clearing  house  emerged 
from  their  usual  passive  role  to  intervene 
and  to  do  a  novel  thing:  they  issued  certifi¬ 
cates  that  they  accepted  in  the  name  of 
the  most  embarrassed  institutions  whose 
fall  they  wished  to  avert,  in  order  to  pre¬ 
vent  the  failure  of  others.  Then,  as  every-  . 
body  was  making  default,  the  Secretary  of 
the  Treasury  in  his  turn  wished  to  aid  the 
common  effort  to  sustain  the  credit  of  the 
situation,  and,  in  order  to  accomplish  this 
by  the  most  regular  methods,  he  pledged 
himself  to  prepay  the  debt,  whose  term 
was  close  at  hand. 

Despite  these  last  helps  it  was  easily  seen 
how  great  must  be  the  disorder,  to  induce 
recourse  to  such  methods.  Never  had  they 
been  employed  until  now,  which  is  proof 
enough  of  the  enormity  of  the  situation, 
whose  equilibrium  had  been  disturbed 
since  1887,  the  year  in  which  high  prices 
in  everything  had  been  reached  on  the 
Stock  Exchange. 

To  still  further  increase  the  joint  respon¬ 
sibility  of  the  members  of  the  clearing 


Panics  in  the  United  States .  1 09 

house,  it  was  agreed  that  a  committee 
should  be  charged  with  receiving  as  col¬ 
lateral  bills  and  securities  in  exchange  for 
which  certificates  of  deposit  bearing  3  per 
cent,  were  issued  at  the  rate  of  75  per  cent, 
of  the  amounts  deposited.  This  agree¬ 
ment  being  adopted,  a  way  to  re-open  the 
National  Metropolitan  Bank  was  sought. 
A  selection  made  from  its  collection  of 
bills  showed  the  securities  it  could  pledge 
for  clearing-house  certificates ;  and,  its  cir¬ 
culation  being  thus  re-established,  it  was 
enabled  on  May  15th  to  take  part  in  set¬ 
tlements. 

Upon  the  announcement  of  a  syndicate 
composed  of  the  banks  and  the  clearing 
house,  things  settled  down  ;  the  general 
distrust  diminished  ;  there  was  the  necessity 
and  wish  to  realize,  but  funds  were  lack¬ 
ing- 

The  rise  in  the  discount  rate  attracted 
foreign  capital  little  by  little,  and  exchange 
grew  easier.  With  the  help  of  the  syndi¬ 
cate  the  credit  circulation  became  re-estab¬ 
lished,  and  the  rate  of  discount  declined  to 
5  per  cent.  For  commercial  needs  money 


no 


A  Brief  History  of 


was  always  to  be  bad  at  4^  per  cent,  and 
at  5  per  cent,  when  at  the  Stock  Exchange 
it  was  necessary  to  pay  4  per  cent,  per 
day! 

The  panic  was  terrible  from  the  3d  to 
the  10th  of  May;  for  two  days  no  one 
wished  to  part  with  his  money;  it  was  im¬ 
possible  to  borrow  on  any  collateral,  at 
any  price  whatever.  Hence  came  a  decline 
in  the  public  securities,  which  fell  below 
the  low  prices  of  1873.  * 

The  public  complained  that  it  could  not 
have  foreseen  the  panic,  because  the  loss  of 
gold  had  been  concealed  by  the  oft-repeated 
assurance  that  there  was  a  reserve  of  $600,- 
000,000  in  Washington. 

Similar  situations  in  1857  and  in  1873 
were  recalled,  and  it  was  remarked  that 
like  troubles  had  not  occurred  until  after  a 
long  period  of  high  prices,  when  capital 
was  scarce  and  the  rate  of  interest  high, 
whereas  this  was  far  from  being  the  case 
at  this  period. 

It  was  nevertheless  notorious  that  the 
decline  in  prices  began  two  years  back,  that 
the  advance  in  prices  had  been  stopped  by 


Panics  in  the  United  States . 


1 1 1 


the  breaking  out  of  the  panic  of  1882  in 
Europe,  at  Paris,  and  that  since  that 
moment  prices  had  begun  to  decline,  less 
rapidly,  however,  than  in  Europe,  because 
the  shock  had  then  merely  disturbed  a 
market  which  had  not  yet  recovered  from 
the  panic  of  1873,  from  which,  in  conse¬ 
quence  of  the  Franco-Prussian  war,  France 
had  escaped.  The  mine  not  being  suffi¬ 
ciently  charged  in  the  United  States  the 
explosion  had  not  recurred.  Speculation, 
unable  to  restore  a  new  impulse  to  the  rise 
in  prices,  was  nevertheless  able  to  hold  its 
own,  until  May,  1884,  when  the  delayed 
explosion  finally  occurred,  covering  the 
market  with  ruins  and  bringing  about  a 
liquidation  with  its  accustomed  train,  a 
great  and  lengthy  decline  of  prices. 

We  may  here  note  similar  delays  in  the 
breaking  out  of  panics,  in  the  period  of 
1837,  1839,  1864-1866  in  France  and  in 
England.  Even  an  involved  state  of  affairs 
may  be  hidden  by  certain  conditions,  and 
the  situation,  although  itself  exposed  to  the 
same  excessive  speculation,  may  witness 
the  breaking  out  of  the  panic  which  has 


I  I  2 


A  Brief  History  of 


been  delayed  for  a  certain  time,  only  to 
occur  simultaneously  with  the  beginning  of 
a  decline  of  prices,  and  when  it  is  thought 
that  danger  has  been  escaped. 

As  in  Brussels  and  in  the  United  States 
in  1837-1839  and  in  England  in  1864-1866, 
large  bouses  and  powerful  institutions  of 
credit  had  maintained  a  whole  scatfolding 
of  speculation  which  was  already  out  of 
plumb,  but  still  able  to  stand  upright 
through  the  general  effect  of  the  parts 
which  connected  them,  and  in  this  unstable 
equilibrium  it  sufficed  for  a  single  one  to 
detach  itself  in  order  to  overthrow  the 
whole  edifice  at  a  juncture  at  which  it  was 
hoped  it  would  continue  to  stand  and  even 
grow  stronger.  Does  not  this  prove  that 
after  these  epochs  of  expansion  and  activity 
characterizing  prosperous  periods  (and  there 
is  no  prosperous  period  without  a  rise  in 
prices)  a  stoppage  is  necessary,  a  panic 
allowing  a  period  of  rest  to  permit  the 
liquidation  of  transactions  employed  in 
helping  to  make  a  series  of  exchanges  at 
high  prices,  and  to  allow  the  capital  and 
savings  of  countries  which  had  been  too 


Panics  in  the  United  States.  1 1 3 

rapidly  scattered  and  exhausted  to  recon¬ 
struct  themselves  during  these  years  of 
tranquillity  and  of  slackening  business  ? 

Confidence  had  already  returned  in  New 
York  despite  the  steady  demands  of  the 
country  bankers  upon  their  correspondents, 
which  pulled  down  the  reserve  below  the 
legal  limit;  nevertheless  in  the  midst  of  all 
the  failures  there  was  no  suspension  of 
specie  payments. 

The  crisis  of  1884,  according  to  the 
Comptroller  of  the  Currency,  had  been  less 
foreseen  than  the  crisis  of  1873,  and  this 
notwithstanding  it  was  sufficient  to  observe 
the  number  of  enterprises  and  schemes 
flung  as  a  prey  to  speculation,  in  order  to 
foresee  that  financial  troubles  and  disasters 
to  the  country  must  result. 

The  continuation  of  payments  in  gold, 
the  low  prices,  and  the  outlook  for  a  fine 
harvest  gave  courage,  preserved  the  re¬ 
maining  confidence,  and  already  allowed  a 
speedy  resumption  of  business  to  be  antici¬ 
pated. 

The  panic,  although  spreading  over  the 

whole  Union,  raged  especially  in  New  York. 

8 


A  Brief  History  of 


1 14 

Without  wishing  to  expatiate  upon  its  pri¬ 
mary  causes,  the  Comptroller  of  the  Treas¬ 
ury  could  not  help  remarking  that  it  had 
shown  itself  under  the  same  circumstances 
as  recently  as  in  1873;  above  all  there  were 
issues  for  new  enterprises ;  the  speculation 
had  rushed  to  take  them  up  at  a  premium, 
and  people  now  asked  their  true  value. 

At  this  juncture  railroad  earnings,  in¬ 
stead  of  increasing,  showed  weakness,  and 
suffered  a  slight  reaction  ;  the  solvency  of 
houses  interested  began  to  be  doubted ;  new 
loans  were  refused  them,  and  immediately 
the  artificially  constructed  edifice  gave  way. 

To  advance  prices  on  the  Stock  Exchange, 
the  banks  had  made  immense  loans  on  the 
shares  and  obligations  of  the  new  railway 
issues,  and  as  soon  as  quotations,  artificially 
maintained  at  the  rates  to  which  they  had 
been  carried,  began  to  drop,  everything  be¬ 
came  unsalable.  Until  this  occurrence,  led 
on  and  fascinated  by  the  rise  in  prices, 
every  one  had  bought ;  hardly  was  the  ad¬ 
vance  arrested  when  every  one  reversed 
their  operations  at  the  same  time.  The 
bankers  had  loaned  not  only  their  capital 


Panics  in  the  United  States .  1 1 5 

but  in  addition  a  part  of  their  clients’  de¬ 
posits  ;  brokers  had  encouraged  a  *  specula¬ 
tion  which  brought  them  business;  and  thus 
it  was  that  all  hands  had  flung  themselves 
upon  a  path  that  could  only  lead  to  ruin. 

The  Comptroller  of  the  Currency  remarks 
with  pride  that,  in  the  midst  of  the  general 
upheaval  and  numerous  failures  of  honor¬ 
able  houses,  only  two  National  Banks  were 
involved :  one  of  them  failed,  the  other 
suspended  payment. 

The  amount  of  liability  of  the  banks  and 
bankers  of  New  York  who  succumbed 
during  the  month  of  May  was  estimated  at 
$32,000,000,  whereas  that  of  the  only  Na¬ 
tional  Bank  which  shared  their  fate  did 
not  exceed  $4,000,000,  the  bank  which 
suspended  not  having  occasioned  any  loss. 

Unhappily  the  year  did  not  pass  without 
its  being  necessary  to  mention  new  misfor¬ 
tunes  :  eleven  National  Banks  failed,  and  it 
is  a  fact  that  among  the  banks  and  private 
bankers  more  than  a  hundred  were  counted 
in  the  list. 

Despite  the  close  watch  bestowed  upon 
the  banks  it  was  surprising  to  uncover  all 


A  Brief  History  of 


1 16 

the  tricks  to  which  the  National  Marine  Bank 
of  New  York  was  given  over,  and  which 
until  now  had  escaped  the  official  examiners. 

It  suspended  payment  on  May  6th,  and 
the  same  day  it  was  debited  with  $555,000 ; 
the  books  had  been  erased  and  overcharged 
for  the  benefit  of  one  client  alone  to  the 
amount  of  $766,000.  He  was  a  debtor  to 
the  amount  of  $2,400,000,  six  times  the 
Bank’s  capital,  and  a  portion  of  this  debt 
was  under  a  good  many  names  of  subordi¬ 
nate  clerks.  This  same  client  had  three 
open  accounts,  one  as  administrator,  then  a 
general  account,  and  a  special  account.  The 
whole  thing  was  fictitious ;  the  schemers 
sought  to  conceal  irregularities,  and  had 
thus  imposed  on  the  examiners  and  on  the 
Directors  themselves. 

The  certificates  issued  by  the  clearing 
house,  when  credit  had  entirely  disappeared, 
rendered  a  great  service  and  sustained  a 
great  number  of  houses  in  equilibrium, 
which  without  this  assistance  must  have 
succumbed.  They  were  granted  especially 
to  the  banks  belonriim  to  the  Association, 
in  order  to  make  their  daily  settlements. 


Panics  in  the  United  States . 


ii  7 

During  the  crisis  of  1873  the  same  means 
had  been  resorted  to,  but  too  late ;  the 
panic  was  already  at  its  height  and  the 
commotion  general,  so  that  nothing  could 
re-establish  confidence.  This  was  not  the 
case  in  1884:  the  rapidity  and  decision 
with  which  the  Associated  Banks  took 
steps  gradually  re-established  confidence 
throughout  the  country.  The  maximum 
of  issue  did  not  exceed  $24,900,000,  of 
which  $7,000,000  were  for  the  National 
Metropolitan  Bank;  from  the  10th  of  June 
balances  at  the  clearing  house  were  paid  in 
legal  money.  Commercial  paper,  which  for 
the  most  part  was  the  collateral  for  these 
certificates,  had  already  been  redeemed. 
The  Metropolitan  National  Bank  alone 
requested  time  to  liquidate. 

The  issue  of  these  certificates  was  very 
rapid  :  $3,800,000  on  the  15th  day  of  May, 
$6,800,000  on  the  16th,  $6,700,000  on  the 
17th,  or  more  than  $17,000,000  in  these 
first  three  days;  then  on  the  19th,  20th, 
and  22d,  $1,500,000,  and  that  was  all. 
The  remainder  of  the  amount  was  given  in 
driblets.  Payments,  although  slower,  were 


1 1 8  A  Brief  History  of 

made  from  the  1st  of  July  to  the  1st  of 
August. 

Let  us  now  run  over  these  occurrences : 
in  1873  instead  of  $24,900,000  in  certifi¬ 
cates  $26,565,000  had  been  issued ;  $22,- 
000,000,  had  been  issued  between  the  2 2d 
and  the  29th  of  September,  the  redemp¬ 
tions  took  place  from  the  3d  of  November 
to  the  31st  of  December. 

In  both  cases  the  same  amount,  so  to 
speak,  had  been  sufficient  to  answer  for  all 
needs.  If  so  small  a  difference  sufficed  to 
save  a  disordered  market,  people  could  not 
understand  why  panics  could  not  be  pro¬ 
vided  against.  It  was  necessary  to  remem¬ 
ber  that  this  assistance  was  only  felt  when 
the  decline  of  prices  had  already  re-establish¬ 
ed  an  exchange  of  goods,  bringing  about  the 
liquidation  of  houses  unfortunately  involved. 

From  the  month  of  June,  owing  to  the 
bank  balances  or  the  rate  of  exchange,  the 
tranquillity  and  steadiness  which  had  be¬ 
come  re-established  grew  daily  ;  after  the 
storm  of  the  first  few  days  no  new  dis¬ 
asters  had  occurred  except  the  failures  of 
Mathew  and  of  Morgan. 


Panics  in  the  United  States . 


119 

The  position  of  the  market  grew  firmer 
and  the  clearing  house  reduced  *  its  loan 
certificates,  which  now  replaced  the  former 
excessive  issues  of  bank  notes.  From  $24,- 
000,000  they  had  already  decreased  to 
$18,000,000;  of  this  amount  $6,000,000 
were  taken  by  banks  as  a  last  resource,  and 
there  then  remained  only  $12,000,000  in 
circulation.  These  $6,000,000  had  served 
to  sustain  the  shaken  banks,  and  it  is 
pleasant  to  state  that  outside  of  these  re¬ 
quirements  the  amount  needed  was  no 
larger. 

Failures  had  ceased  in  the  great  centres, 
but  they  continued  in  the  interior  of  the 
country  ;  the  shock,  like  a  great  wave,  took 
a  certain  time  to  overrun  the  various 
States. 

Succession  of  Panics  in  the  United  States 
Studied  through  the  Balances  of  the  Banks. 

— Following  the  historical  summary  of 
panics  in  the  United  States  it  will  be  use¬ 
ful  to  have  a  general  table,  so  as  to  glance 
at  the  very  rare  documents  which  permit 
us  to  follow  the  working  of  the  Banks 
through  their  balance  sheets.  We  know 


I 


120  A  Brief  History  of 

their  organization,  and  we  take  upon  our¬ 
selves  to  state  results  flowing  from  it. 

It  strikes  us  at  once  that  abuses  and 
panics  have  constantly  occurred.  Can  we 
note  a  difference  in  the  frequency  and 
gravity  of  the  casualties,  according  to 
whether  we  observe  them  working  under 
the  former  or  the  new  (the  National  Bank) 
system,  inaugurated  during  the  War  of  the 
Secession  in  1864,  when  the  machinery  for 
the  issue  of  bank  notes  was  insufficient  for 
the  new  requirements  ? 

Without  lingering  over  the  regulations 
before  and  after  1864,  let  us  consider  the 
differences  we  may  ascertain  by  examining 
the  balance  sheets.  Unfortunately,  the 
exactness  of  our  observation  is  lessened  on 
account  of  the  very  diversity  of  the  field 
it  covers. 

In  the  case  of  the  banks  of  the  United 
States  we  have  had  to  content  ourselves 
with  the  returns  that  the  Comptroller  of 
the  Currency  gives  in  his  annual  report  on 
a  stated  day  during  the  months  of  Febru¬ 
ary,  May,  June,  October,  and  December, 
beginning  with  the  year  1865.  Before 


Panics  in  the  United  States. 


I  2  I 


that  period  we  had  only  the  yearly  situa¬ 
tion  of  the  banks  of  the  different  States 
upon  one  given  day ;  we  are  better  in¬ 
formed  on  the  second  period ;  however, 
basing  our  conclusions  upon  the  few  bal¬ 
ance  sheets  we  possess,  we  ascertain  the 
same  series  of  development  and  increase. 
Although  there  are  lapses,  still,  from 
another  point  of  view,  the  table  will 
be  more  complete,  because  it  embraces 
all  the  banks  of  the  United  States.  On 
such  an  extended  field,  it  is  true,  we  risk 
seeing  great  discrepancies  disappear  and 
lose  themselves  in  the  magnitude  of  the 
amounts  whose  movements  we  follow.  In 
order  better  to  grasp  them,  we  have  put 
before  us  the  returns  of  the  banks  of  the 
United  States,  together  with  those  of  the 
Associated  Banks  of  New  York  City  ;  we 
may  thus  recognize  and  follow  the  share 
played  by  each  of  them. 

During  the  first  period  of  the  State 
Banks  (1811-1864),  the  increase  in  the 
number  of  the  banks  was  continuous,  except 
for  two  stoppages,  in  1841  and  in  1862; 
in  1841,  during  the  liquidation  of  the 


122 


A  Brief  History  of 


panic  of  1839,  and  in  1862  at  the  begin¬ 
ning  of  the  War  of  Secession  ;  the  crisis  of 
1857  did  not  interrupt  the  movement. 

The  capital  of  the  banks  had  followed 
the  same  changes.  From  $52,000,000  in 
1811  to  $358,000,000  in  1840,  a  reduction 
to  $196,000,000  in  1846,  and  finally  the 
last  maximum  reached  in  1861,  $429,000,- 
000,  at  the  breaking  out  of  the  war.  In 
1864  a  new  organization  of  the  banks 
under  the  name  of  “  National  Banks” 
presented  to  the  State  Banks,  without 
suppressing  them,  a  state  of  affairs  des¬ 
tined  to  cause  their  liquidation,  which,  in 
fact,  practically  occurred. 

As  in  England  and  France,  the  amount 
of  discounts,  as  the  balance  sheets  give  it 
to  us,  rose  each  year  during  the  prosper¬ 
ous  period. 

Thus  from  1830  to  1839  it  reached 
$492,000,000  from  $200,000,000,  to  decline 
again  to  $254,000,000  at  the  end  of  the 
liquidation  in  1843. 

In  the  following  period  the  same  rising 
movement  from  $254,000,000  to  $344,000,- 
000  was  reproduced  in  1848.  The  panic 


Panics  in  the  United  States .  123 

in  Europe  burst  forth  in  1847 ;  it  re¬ 
sounded  very  slightly  in  the  United  States 
in  1848,  as  its  subsequent  liquidation  in 
1849  indicates,  which  only  reduced  the 
local  discounts  to  $332,000,000. 

A  new  period  of  prosperity  followed  the 
preceding  events ;  the  growing  movement 
re-appeared,  and  from  $332,000,000  carried 
the  amount  of  the  discounts  to  $684,000,- 
000  between  1849  and  1857.  The  panic 
broke  out  simultaneously  throughout  the 
whole  world ;  but  notwithstanding  the 
wrecks  it  caused,  such  was  the  saving  al¬ 
ready,  so  healthy  was  the  general  situation 
of  business,  that,  after  having  thrown  out 
a  little  scum,  the  current  of  affairs  resumed 
its  course  until  1861,  and  discounts  had  al¬ 
ready  reached  the  amount  of  $696,000,000. 
This  amount  is  greater  than  that  we  have 
noted  in  1857,  but  at  that  time  (whilst  the 
movement  continued  in  Europe  up  to 
1864),  despite  the  shock  it  received  by  the 
declaration  of  war  here,  there  was  com¬ 
plete  stoppage  until  the  end  of  the  strug¬ 
gle  ;  we  have  here  come  across  a  political 
panic,  not  a  business  one.  Peace  re-estab- 


124 


A  Brief  History  of 


lished,  the  movement  resumed  its  course 
under  new  conditions  and  with  a  reorgani¬ 
zation  of  the  banks  under  the  name  of 
“  National  Banks.”  A  change  was  due, 
but,  as  everything  was  made  ready,  it 
was  speedy.  The  first  balance  sheet  of 
the  National  Banks  dates  from  1864. 
The  amount  of  discounts  had  already 
exceeded  the  sum  of  $100,000,000  in 
1865,  and  grew  to  $500,000,000  in  1866. 
Once  started  the  movement  took  its  own 
course : 


1865... 

. . .  $166,000,000 

1870 . . . 

.  .  .$725,000,000 

1866 . . . 

.  . .  .  500,000,000 

1871 .. . 

. .  .  .  831,000,000 

1867 . . . 

. 609,000,000 

1872 . . . 

. . .  .  885,000,000 

1868... 

.  . .  .  657,000,000 

1873. •• 

1869 . . . 

.  . .  .  686,000,000 

The  yearly  progression  was  interrupted 
as  in  Europe,  and  the  explosion  occurred 
at  the  same  time.  The  rise  in  prices 
stopped,  and  incipient  liquidation  became 
apparent  at  the  end  of  the  year,  and  re¬ 
duced  the  amount  of  paper  on  hand  to 
$846,000,000,  but,  instead  of  lasting,  as  in 
Europe,  a  movement  of  revival,  analogous 
to  that  which  had  followed  the  panic  of 
1864  in  England,  occurred.  The  amount  of 


Panics  in  the  United  States.  125 

discounts  rose  from  $856,000,000  to  $984,- 
000,000  in  1875,  and  then,  and  then  only, 
the  real  retrograde  movement  showed  itself 
as  in  Europe,  and  reduced  the  amount  of 
the  discounts  to  $814,000,000  in  1879, 
simultaneously  with  the  movement  in 
France  and  in  England,  when  prices  had 
reached  the  lowest  quotations,  and  when  a 
resumption  of  business  was  about  to  occur. 
In  a  word,  affairs  resumed  their  course ; 
from  the  end  of  the  year  the  amount  of 
paper  discounted  rose  to  $933,000,000,  and 
the  steady  advance  as  set  forth  in  table 
No.  3  continued  each  year,  until  it  reached 
$1,300,000,000  in  1884.  The  panic  had 
burst  forth  in  Europe  in  1882,  and  the 
agitation,  so  lively  was  its  impulse,  lasted 
during  eighteen  months ;  but,  as  we  have 
stated,  the  rise  in  prices  ceased  in  1882. 

Starting  from  this  time,  a  reaction  ap¬ 
peared.  The  paper  on  hand  lowered  to 
$1,200,000,000  in  1885*  This  liquidation 
was  scarcely  noticeable,  because  we  cover 
the  whole  Union,  and  there  is  always  an 
upward  movement  in  the  new  portions  of 
it  which  have  not  yet  taken  part  in  busi- 


126 


A  Brief  History  of 


ness  movements.  If  we  note  what  occurred 
in  the  Associated  Banks  of  New  York,  the 
very  place  where  the  greatest  amount  of 
business  is  carried  on,  the  depression  of 
the  amount  of  paper  on  hand  is  most 
noticeable  after  the  inflation  observed  at 
the  height  of  the  panic,  while  the  decrease 
that  we  point  out  showed  itself  more 
slowly  with  the  slackening  of  business. 
Thus,  in  the  last  period,  the  greatest  amount 
of  paper  appears  on  hand — at  the  close 
of  1881,  $850,000,000,  and  the  minimum 
in  December,  1884,  the  very  year  the  panic 
had  burst  forth,  and  when,  during  the  first 
months,  the  sum  of  $351,000,000  reappeared 
once  more  ;  except  for  a  million,  exactly  the 
same  amount  there  was  in  1881. 

This  maximum  amount  was  only  an 
accident,  under  the  influence  of  pressing 
needs  at  the  time  of  the  difficulty,  for  since 
1881  the  yearly  reduction  of  the  maximum 
and  minimum  amounts  ensued.  This  ten¬ 
dency  had  occurred  suddenly,  and  disap¬ 
peared  likewise;  the  resumption  dating 
from  1885,  a  year  sooner  than  in  Europe. 

The  discounts  of  the  New  York  Banks, 


Panics  in  the  United  States .  127 

which  had  been  reduced  to  $287,000,000, 
rose  immediately  upon  the  opening  of  the 
new  period  of  prosperity,  and  a  growing 
activity  carried  them  to  $408,000,000  in 
1889  ;  after  a  few  more  fortunate  years  we 
come  to  the  end  of  the  period  of  prosperity 
and  high  prices. 

We  gather  the  following  about  discounts 
from  the  balance  sheets  of  the  Associated 
Banks  of  New  York.  If  we  cast  our  eyes 
over  the  balance  sheets  of  the  National 
Banks  of  the  Union,  we  must  note  a  falling 
off  of  $100,000,000  in  the  paper  discounted, 
that  is,  from  $1,300,000,000  to  $1,200,000,- 
000  (1884-1885).  After  this  short  period 
of  stoppage,  clearly  indicating  the  neces¬ 
sity  for  liquidation,  discounts  resumed  their 
steady  expansion,  and  rose  to  $1,470,000,- 
000  in  1886,  to  $1,587,000,000  in  1887,  and 
finally  to  $1,684,000,000  in  1888,  when  we 
were  in  the  midst  of  a  period  of  develop¬ 
ment  and  consequently  of  high  prices  and 
of  prosperity ;  and  the  same  is  true  in 
France  and  England. 

The  study  of  a  single  section  of  the 
balance  sheets,  that  of  discounts  and  loans, 


128 


A  Brief  History  of 


has  allowed  us  to  follow  the  periods  of 
prosperity,  of  panic,  and  of  liquidation. 
When  we  next  consider  the  other  sections, 
we  find  the  confirmation  of  our  anticipa¬ 
tions.  Among  these  sections,  in  the  order 
of  importance,  we  notice  first,  public  de¬ 
posits  in  the  form  of  running  accounts ; 
they  constitute  the  reverse  of  the  loans  and 
discounts,  whose  total  is  immediately 
credited  to  the  banks’  clients,  and  the  in¬ 
crease  of  paper  on  hand  also  follows. 
From  1865  to  1878  the  steady  increase 
was  uninterrupted,  viz.,  from  §183,000,000 
to  $656,000,000  ;  the  maximum  amount 
shows  itself  in  the  first  quarter  of  1873, 
eight  months  before  the  maximum  of 
discounts  and  loans ;  in  1888  they  ran 
down  to  $622,000,000  ;  there  is,  say,  a 
difference  of  $300,000,000  between  the 
two  totals,  and  this  difference  is  the  same, 
we  observe,  as  that  between  the  highest 
and  the  lowest  of  the  two  sections,  as 
we  notice  it  in  the  same  year,  during 
the  liquidation  of  the  panic  of  1873.1 

1  See  table  of  balance  sheets  of  the  Banks  of  the  United 
States. 


Panics  in  the  United  States.  129 

In  the  last  period  the  progression  is  the 
same ;  from  $598,000,000  the  amount  of 
deposits  advanced  to  $1,350,000,000,  whilst 
discounts  and  loans  reached  $1,684,000,000 ; 
that  is  to  say,  there  was  still  a  difference 
of  $334,000,000.  The  relationship  of  the 
two  sections  was  much  more  marked  than 
in  France  and  in  England,  where  the 
amounts  carried  in  accounts  current  vary 
more. 

In  the  United  States  we  then  experi¬ 
enced  a  market  based  on  credit,  which, 
through  discounts  or  loans  by  the  banks, 
had  reached  the  amount  of  the  accounts 
current,  and  was  about  to  call  the  clearing 
house  into  action  to  settle  debts  every* 
where. 

The  office  of  the  circulation  of  bank 
notes,  subsequent  to  the  severe  regulations 
enacted  in  1863  for  the  organization  of 
National  Banks,  had  varied  in  the  last  two 
periods  that  we  are  studying.  From  1863 
to  1873,  after  the  war  troubles,  in  propor¬ 
tion  as  greenbacks  were  withdrawn,  the 
bank  notes  issued  by  the  National  Banks 
not  only  took  their  place,  but  replaced 


130 


A  Brief  History  of 


those  of  the  State  Banks,  whose  position 
the  National  Banks  had  taken. 

We  observe  them  rise  firstly  from  $66,- 
000,000  to  $341,000,000  (1865-1873)  at 
the  sharpest  period  of  the  panic.  We  might 
even  charge  them  with  causing  it,  if  the 
disproportion  alone  of  the  two  sums,  $341,- 
000,000  bank  notes  compared  with  $944,- 
000,000  of  bills  discounted,  did  not  at  once 
repel  this  theory.  It  is  only  necessary  to 
glance  at  this  idea  to  see  its  falsity. 

The  maximum  circulation  of  bank  notes 
has  here  coincided  with  the  panic,  a  thing 
which  had  not  happened  either  in  France 
or  in  England  for  a  long  time,  and  instead 
of  presenting  its  highest  figure  during  the 
liquidation  of  the  panic  of  1873,  it  shows 
us  its  lowest  figure,  $290,000,000  in  1877. 
Far  indeed  from  increasing  at  this  time  as 
happened  in  Europe,  the  amount  of  bank 
notes  in  circulation  decreased  by  means  of 
the  ebbs  of  metallic  cash  into  the  coffers  of 
the  banks  :  in  reality  the  cause  was  lacking 
here;  the  ebb  of  specie  was  hardly  felt  at  all. 

With  $4,000,000  in  1865,  the  reserve 
was  poorly  provided,  increasing  to  $48,- 


Panics  in  the  United  States . 


131 

000,000  in  1870.  At  the  end  of  the  burst¬ 
ing  forth  of  the  panic  of  1873  it  became 
reduced  to  $10,000,000,  at  the  worst  of  the 
panic  to  $16,000,000  ;  then,  under  the  in¬ 
fluence  of  a  slight  whirl,  it  rose  to  $33,- 
000,000  in  1874,  without  reaching  the 
highest  figure  of  the  preceding  period,  but 
soon  the  flow  reappeared  and  reduced  this 
metallic  reserve  to  $8,000,000  in  1875.  It 
was  not  until  after  this  depression  that  the 
true  ebb  reappeared,  when  the  circulation 
of  bank  notes  was  at  its  lowest  figure 
($290,000,000). 

Whilst  the  $8,000,000  specie  reserve 
grew  successively  to  $54,000,000,  $79,000,- 
000,  $109,000,000,  and  finally  to  $128,000,- 
000  in  1878,  1879,  1880,  and  1881 ;  that  is 
to  say,  upon  the  approach  of  the  panic,  the 
circulation  also  expanded  from  $290,000,- 
000  to  its  highest  figure  $323,000,000  in 

1882,  the  year  of  the  European  crash  and 
of  the  stoppage  of  the  rise  of  prices  in  the 
United  States.  As  to  the  minimum  amount 
of  the  specie  reserve,  it  is  to  be  noted  in 

1883,  between  the  critical  years  1882  and 

1884, 


132 


A  Brief  History  of 


Metallic  reserves  are  too  small  in  the 
United  States  for  their  fluctuations  to  ex¬ 
hibit  the  same  regular  course  they  offer  us 
in  Europe ;  the  least  need  exhausts  them, 
and  the  smallest  payments  fill  them  to  over¬ 
flowing.  The  panic  soon  brought  about  a 
default  in  payment  and  a  need  of  metallic 
money  to  re-establish  equilibrium,  but  this 
remedy,  if  it  does  precede  panics,  sometimes 
precedes  them  by  a  year,  as  we  have  ob¬ 
served  in  1883,  and  the  same  irregularity 
is  apparent  whether  we  observe  the  banks 
of  the  whole  United  States,  or  the  Asso¬ 
ciated  Banks  of  the  City  of  New  York. 

After  the  panic  of  1882-1884,  the  ebb  of 
specie  into  the  coffers  of  the  National 
Banks  of  the  United  States  and  of  the 
Associated  Banks  of  New  York  resumed 
its  usual  course,  and  raised  its  level  in  the 
case  of  the  National  Banks  from  $97,000,- 
000  to  $177,000,000  between  1883  and 
1885,  and  even  to  $181,000,000  in  1888. 
This  ebb  occurred  both  in  England  and 
France  at  the  same  time,  proving  that  cash 
reserves  do  not  increase  to  the  detriment  of 
each  other  ;  it  is  a  flood  of  specie  or  of  bar- 


Panics  in  the  United  States.  133 

gold  rendered  easily  available,  through  the 
conclusion  of  the  decline  of  prices  and  the 
slackening  of  business,  extending  to  the 
whole  world,  and  in  which  each  one  par¬ 
takes  in  proportion  to  its  wealth,  and  above 
all  in  proportion  to  its  credit  circulation, 
and  of  the  perfection  of  the  settlements  by 
means  of  clearing  houses. 

This  regular  course  in  the  metallic  re¬ 
serves  is  no  longer  to  be  noted  in  the  cir¬ 
culation  of  bank  notes;  instead  of  increas¬ 
ing  and  of  entering  its  exchanges  during 
the  return  of  specie  into  the  coffers  of  the 
banks,  they  again  took  part  in  the  paper- 
money  reserves.  From  $323,000,000  in 
1882  we  see  the  circulation  of  bank 
notes  decrease  each  year  little  by  little 
until  it  is  reduced  to  $151,000,000  in  1888  ; 
and  this  remarkable  fact  confronts  us  in 
the  face  of  an  unheard  of  expansion  of 
business,  almost  50  per  cent,  greater  than 
in  1873;  and  of  a  twofold  simultaneous 
reappearance  of  $84,000,000  specie  and  of 
$172,000,000  bank  notes.  What  then  is 
the  role  of  specie  and  of  bank  notes  in  the 
course  of  business  in  the  United  States  ? 


134 


A  Brief  History  of 


Much  inferior  to  that  which  it  plays  in 
Europe  in  the  absence  of  the  machinery  of 
a  clearing  house  embracing  the  whole 
country,  instead  of  being  limited  to  some 
large  cities. 

The  multiplicity  of  banks  has  strikingly 
helped  the  economic  progress  of  the 
United  States.  From  1,500  National  Banks 
in  1865  with  a  capital  of  §393,000,000,  the 
number  rapidly  rose  to  2,089  in  1876. 

The  panic  of  1873  did  not  hinder  the 
movement ;  however,  during  its  liquida¬ 
tion,  the  number  shrank  to  2,048,  only  to 
rapidly  advance  to  2,500  by  the  close  of 
1882,  and  2,664  in  1884,  and  this  move¬ 
ment  did  not  even  suffer  a  slackening  as  in 
1873  during  the  liquidation  of  its  crisis  ;  it 
continued  steadily,  and  we  enumerate  3,120 
banks  in  1888. 

The  increase  is  a  third  more  than  in 
1876,  but  it  is  far  from  being  thus  in  the 
case  of  the  capital,  which  only  rose  from 
$504,000,000  to  $588,000,000 — that  is,  only 
16  per  cent.  The  small  banks  in  the  new 
centres  of  population  are  the  factor,  then, 
which  annually  increases  the  number. 


I 


Panics  in  the  United  States .  135 

The  Condition  of  Business  in  1888-92.1 — 

The  year  1888  was  fairly  prosperous  de¬ 
spite  a  Presidential  election,  but  securities 
were  heavy,  depression  was  general,  and 
some  few  stocks  shrank  amazingly.  Exces¬ 
sive  issue  of  new  railroad  securities  and 
disastrous  competition  between  certain  of 
the  Southwestern  roads  were  without 
prudence.  Money  was  easy,  bank-note 
circulation  continued  to  decrease  till  it  was 
only  $151,000,000,  and  legal  tenders  to 
$81,000,000,  but  specie  reserve  rose  to 
$181,000,000,  the  banking  capital  to  $592,- 
000,000  plus,  the  exports  to  $1,350,000,- 
000,  and  discounts  and  loans  rose  to 
$1,684,000,000. 

The  sharp  speculations  in  wheat  and  the 
formation  of  the  French  copper  corner 
caused  a  certain  fluctuation  in  general  busi¬ 
ness.  Large  crops,  excepting  wheat;  a 
flourishing  cotton  manufacture,  a  decline 
in  production  of  petroleum  by  agreement, 
a  6  per  cent,  decline  in  pig-iron  production, 
a  very  heavy  one  in  Bessemer  iron,  and  a 

1  The  facts  I  state  in  this  rfcumd  are  based  upon  statistics 
printed  in  the  Commercial  and  Financial  Chronicle. — DeC. 
W.  Thom. 


i36 


A  Brief  History  of 


very  small  export  trade  as  compared  with 
imports  occurred.  But  in  the  year  1889, 
the  export  movement,  consisting  largely  of 
cotton,  was  very  great,  being  the  greatest 
since  1880,  and  near  the  maximum,  and 
compared  favorably  with  the  immense 
imports  induced  by  the  new  tariff  of  1890. 
In  fact,  the  year  1889  surpassed  all  its 
predecessors  in  the  volume  of  trade  move¬ 
ments  ;  the  bank  clearings  showing  an 
increase  of  13  per  cent,  over  1888.  The 
cotton,  corn,  and  oats  crops  were  the  largest 
ever  raised,  and  the  wheat  crop  was  almost 
the  largest.  But  cotton  brought  fair  prices, 
and  cotton  manufactures  and  production 
of  iron  were  also  considerably  ahead  of 
any  previous  year,  while  petroleum  played 
an  important  part  at  good  prices.  Railroad 
earnings  showed  a  wonderful  recovery 
from  1888,  and  many  reports  gave  the 
largest  figures  ever  recorded. 

During  this  year  many  consolidations 
and  a  number  of  foreclosures  occurred. 
Railroad  building  fell  to  5,000  miles  com¬ 
pared  to  7,000  in  1888.  In  general  busi¬ 
ness,  manufacturing  and  trade  were  ex- 


Panics  in  the  United  States . 


137 

tremely  active,  yielding  plenty  of  work, 
good  wages,  and  fair  profits. 

But  the  wool  crop  and  its  manufacture, 
a  decline  in  the  anthracite  coal  production, 
farm-mortgage  pressure  in  the  middle 
West,  and  low  rates  for  corn  and  oats 
were  untoward  circumstances.  Specula¬ 
tion  on  the  general  exchange  was  small, 
indicating  a  growing  congestion,  as  was 
proved  by  the  low  bank  reserves,  especially 
in  the  last  quarter  of  the  year ;  but  there 
was  a  heavy  absorption  of  investment 
securities. 

Gold,  to  the  amount  of  $37,000,000,  was 
exported  in  the  first  six  months.  A  small 
amount  of  it  returned  before  1890. 

Failures  exceeded  those  of  1888  by  203 
in  number  and  about  20  per  cent,  in  money. 
The  woollen  trade  contributed  much  of  this 
showing. 

Importations  surpassed  all  previous  years, 
while  exports  exceeded  them  by  nearly 
$20,000,000,  and  the  net  export  of  gold 
amounted  to  nearly  $40,000,000.  Money 
was  easy  during  the  first  quarter,  and  then 
for  a  week  a  10  per  cent,  rate  occurred. 


138 


A  Brief  History  of 


Thereafter,  excepting  the  usual  July  1st 
hardening,  easy  rates  prevailed  till  August. 
Stiffening  and  fluctuating  rates  ensued  till 
30  to  40  per  cent,  in  exceptional  cases  had 
been  reached  in  December. 

During  the  year,  bank  circulation  de¬ 
clined  to  $126,000,000.  Specie  reserve 
sank  to  $164,000,000  and  rose  to  $171,- 
000,000  with  the  ending  of  the  year ;  legal 
tenders  to  $84,000,000,  and  the  number  of 
banks  rose  to  3,326 ;  their  capital  to 
$617,000,000;  their  deposits  to  $1,436,- 
000,000,  and  their  discounts  and  loans  to 
$1,817,000,000,  and  surplus  and  undivided 
profits  to  $269,000,000. 

Unused  deposits,  capital,  surplus,  and  un¬ 
divided  profits  were  growing  very  small  in 
comparison  with  loans  and  discounts  at  the 
end  of  the  year. 

The  banks  had  to  work  closely,  and  the 
demands  of  the  South  and  West  for  cur¬ 
rency  were  severely  felt. 

Panic  of  1890. — In  this  condition  the 
year  1890  opened,  and,  with  ever  growing 
pressure  for  bank  accommodation,  displayed 
great  activity  throughout  all  departments 


Panics  in  the  United  States.  139 

of  trade  and  transportation,  with  an  un¬ 
equalled  volume  of  transactions.  ' 

But  it  was  as  impossible  to  grant  to  the 
overtrading  the  money  needed, — though  the 
Secretary  of  the  Treasury,  in  seventy  days, 
threw  a  million  a  day  into  the  market  by 
buying  Government  Bonds, — as  it  had  been 
for  the  “  Gentleman’s  Agreement  ”  of  1888 
— that  of  the  chief  railroad  presidents — to 
maintain  rates,  to  permanently  sustain 
prices  of  railroad  securities  against  an  over¬ 
supply  of  them ;  however,  both  delayed 
the  inevitable. 

The  debates  on  the  silver  question  in 
Congress,  leading  to  hopes  of  cheap  money, 
and  the  higher  prices  due  to  this  temporary 
and  delusive  stimulus ;  the  large  gross 
railroad  earnings,  demand  for  structural 
iron ;  the  Buenos  Ayres  crisis,  leading 
London  to  ship  us  large  amounts  of  our 
securities;  our  small  wheat,  oats,  and  corn 
crops,  and  large  cotton  crop  ;  the  tariff  dis¬ 
cussion,  ending  with  the  McKinley  Bill  on 
October  6th,  and  the  low  bank  reserves  and 
money  pressure  beginning  in  August  and 
lasting  pretty  steadily  till  December,  and 


140 


A  Brief  History  of 


an  immense  shrinking  of  securities,  were 
the  chief  features  of  the  year  ;  and  failures 
beginning  with  that  of  Decker,  Howell,  & 
Co.,  in  New  York,  on  November  11th,  and 
reaching  a  climax  with  the  embarrassment 
of  Baring  Brothers  1  in  mid-November, 
which  failure  itself  greatly  accelerated  the 
panic,  were  the  chief  events  of  the  year. 
Railroad  building  had  increased  to  6,081 
miles,  and  the  consequent  new  securities 
were  poorly  absorbed.  Manufactures  were 
generally  prosperous. 

The  huge  imports  to  take  advantage  of 

1  Meanwhile  Messrs.  Charles  M.  Whitney  &  Co.,  David 
Richmond,  J.  C.  Walcott  &  Co.,  Mills,  Roberson,  &  Smith, 
Randall  &  Wierum,  Gregory  &  Ballou,  P.  Gallaudet&  Co.,  had 
failed  in  New  York,  the  North  River  Bank  of  that  city  had 
been  thrown  into  a  receivership,  and  in  Philadelphia  the  failure 
of  Messrs.  Barker  Brothers,  had  been  followed  by  a  number  of 
others.  This  was  all  bad  enough,  but  sinks  into  insignificance 
when  we  recall  the  financial  terror  inspired  by  the  great  and 
historic  house  of  Baring  Brothers  proving  unable  to  meet  its 
engagements,  amounting  to  about  ^28,000,000.  The  Bank  of 
England  received  notice  of  its  difficulties  on  September  7th, 
and  by  the  15th  had  secured  from  a  syndicate,  composed  of  the 
great  London  houses,  a  guaranty  that  it  would  be  protected 
from  loss  to  the  amount  of  ^4,000,000  if  it  would  liquidate 
the  Barings’  business,  and  from  the  British  Government  the 
right  to  issue  ,£7,000,000  of  notes  provided  that  sum  was  used 
to  loan  the  Barings,  and  it  therefore  assumed  on  that  date  the 
task  of  paying  the  Barings’  acceptances  of  ^21,000,000  and 


Panics  in  the  United  States .  141 

old  tariff  rates  absorbed  much  money, 
while  the  Baring  liquidation  and  that  of 
other  houses  identified  with  South  Ameri¬ 
can  enterprises,  and  the  distrust  bred  by 
our  Silver  Bill  caused  a  return  of  our  se¬ 
curities,  necessitating  such  a  curtailment 
of  credit  that  our  panic  took  place.  From 
July  through  December  31st,  money  ruled 
high  and  fluctuating. 

The  year  shows  a  decline  in  circulation 
to  $123,000,000,  a  decline  of  specie  reserve 
to  $178,000,000  with  a  subsequent  rise  to 
$190,000,000,  a  decline  in  legal  tenders  to 
$82,000,000,  and  of  deposits  to  $1,485,- 

^7,500,00°  of  other  liabilities.  Thus  was  averted  what  would 
probably  have  been  the  greatest  panic  in  the  world’s  history. 
That  which  occurred  was  a  mere  bagatelle  to  what  was  threat¬ 
ened.  It  is  difficult  to  bestow  too  much  credit  upon  Mr. 
William  Lidderdale,  Governor  of  the  Bank  of  England,  for 
conceiving  and  managing  this  plan.  He  has  saved  hundreds  of 
thousands  of  homes  and  interests  from  misery.  Under  his 
able  administration  it  is  expected  to  extinguish  the  Barings’ 
liabilities  without  calling  on  the  Government,  and  it  is  be¬ 
lieved  something  will  be  saved  for  the  Barings  from  their 
former  assets  in  business.  This  is  deeply  to  be  wished,  for 
though  the  Barings  have  continued  business  under  form  of  a 
stock  concern  with  a  million  pounds  capital,  they  are  wonder¬ 
fully  restricted  as  compared  with  their  former  state.  They 
have  performed  in  banking  too  many  helpful  actions  in  fur¬ 
therance  of  civilization  to  be  eclipsed  without  sincere  regret. 


142 


A  Brief  History  of 


000,000,  while  the  banks  increased  to  3,573 
with  a  capital  of  $657,000,000,  and  a  sur¬ 
plus  and  reserve  of  $316,000,000,  and  dis¬ 
counts  and  loans  rose  to  $1,932,000,000. 

The  year  1891  has  exhibited  the  usual  in¬ 
cidents  succeeding  a  time  of  reorganizations 
after  panics  and,  after  a  period  of  selling 
and  settlement,  a  rehabilitation  of  affairs 
and  the  consequent  advance  in  prices  of 
securities.  The  unprecedented  abundance 
of  our  crops  as  a  whole,  coupled  with  the 
almost  universal  shortage  in  European 
countries,  largely  aided  the  rehabilitation. 
Bank  balances  reflected  this  startlingly. 
On  February  26, 1891,  loans  and  discounts 
and  over-drafts  amounted  to  $1,927,654,- 
559.80.  On  May  4,  1891,  loans  and  dis¬ 
counts  and  over-drafts  amounted  to  $1,969, - 
$46,379.67.  On  the  former  date  capital, 
deposits,  surplus,  and  undivided  profits 
amounted  to  $2,462,456,677.92,  and  on  the 
latter  date  to  $2,567,288,143.45. 

On  July  9,  1891,  discounts,  loans,  and 
over-drafts  amounted  to  $1,963,704,948.07, 
and  capital,  deposits,  surplus,  and  undivided 
profits  to  $2,522,609,679.78. 


Panics  in  the  United  States.  143 

Confidence  is  restored  and  prices  have 
advanced,  and  should  advance  still  further. 
There  seem  to  be  only  three  things  that 
could  check  the  advancing  market,  and  of 
those  the  two  chief  ones  seem  pretty  surely 
relegated  to  a  fairly  distant  future.  These 
latter  two  are,  in  the  order  of  importance : 
(1)  a  free  silver  law a  law  making,  say, 
67  cents’  worth  of  silver  pass  for  an  equiva¬ 
lent  of  a  100-cent  dollar;  and  (2)  a  very 
radical  and  abrupt  change  in  our  tariff  law. 
The  remaining  and  very  minor  influence  is 
the  breaking  out  of  a  general  European 
war,  which  would  at  first  induce  a  selling 
of  our  securities,  and  so  lower  prices,  but 
which  finally  and  shortly  would  benefit  us 
by  a  subsequent  returning  flood  of  money 
exchanged  for  our  various  bread-stuffs,  and 
supplies,  and  even  securities  of  different 
sorts. 

It  would  be  better  for  our  future  if  the 
liquidation  of  the  last  panic  had  been  more 
radical  in  some  cases,  notably  in  land  specu¬ 
lation.  In  this  liquidation  has  not  been 
thorough,  and,  as  far  as  these  cases  influence 
the  market,  it  has  remained  for  a  long  time 


144  ^  Brief  History  of 

unsound,  and  even  now  is  not  fully  re¬ 
covered. 

The  past  twelve  months  have  witnessed 
a  continued  settling  of  old  accounts,  and 
the  undertaking  of  new  business,  in  a  limited 
way,  despite  a  somewhat  uneasy  feeling 
about  silver  and  the  now  accomplished 
Presidential  election.  But  the  fact  that  an 
analysis  of  the  bank  returns  to  the  Comp¬ 
troller  of  the  Treasury  shows  that  available 
resources  (capital,  deposits,  surplus,  and 
undivided  profits),  as  compared  with  de¬ 
mands  (loans  and  discounts),  are  good  and 
growing,  considered  in  regard  to  the  other 
signs  indicating  prosperity  (see  Introduc¬ 
tion),  justifies  the  prediction  of  the  steady 
development  of  a  prosperous  period. 


Panics  in  the  United  States.  145 

Panic  of  1893-4. — It  was  early  in  1893 
that  I  wrote  the  last  page  of  A  Brief 
History  of  Panics  in  the  United  States. 
Two  of  the  three  checks  to  business 
prosperity  to  which  I  then  referred, 
virtually  occurred  very  soon.  The  deter¬ 
mined  resolve  of  the 1 1  free  silver  ’  ’  members 
of  Congress  to  continue  the  heavy  month¬ 
ly  utterance  of  silver  dollars  redeemable 
at  par  in  gold  kept  many  business  men 
most  disquieted.  They  saw  that  the 
free  gold  in  the  Treasury  was  sinking 
greatly  and  steadily.  They  knew,  also, 
that  there  was  semi-official  assertion  of 
the  right  of  the  United  States  to  redeem 
its  silver  dollars  in  Government  notes. 
The  Free-Coinage  Bill  had  been  passed 
by  the  Senate  in  July.  The  House  de¬ 
feated  it.  The  legal  fights  against  certain 
great  railroad  combinations  and  frequent 
labor  strikes  put  additional  burdens  on 
the  market. 

In  the  United  States  and  abroad  the 
doubt  of  our  willingness  and  ability  to 
redeem  our  obligations  at  par  in  gold  on 
demand  grew  most  rapidly.  Accordingly, 


zo 


146  A  Brief  History  of 

exports  of  gold  increased  and  hoarding 
of  it  began  at  home.  To  all  this  was 
added  the  expectation  of  a  severe  down¬ 
ward  revision  of  our  tariff  laws  if  the 
Democratic  Party  should  succeed,  as 
was  expected,  in  the  Presidential  election 
in  November. 

Business  was  scared  and  slowing  down 
and,  therefore,  using  less  and  less  of  its 
working  capital.  The  false  ease  of  increas¬ 
ing  loanable  funds  in  the  custody  of  the 
banks  lulled  many  into  a  specious 
confidence.  But  gold  was  exported  in  in¬ 
creasing  quantities.  Should  the  Govern¬ 
ment  issue  bonds  in  exchange  for  gold 
for  the  purposes  of  redemption?  The 
Philadelphia  &  Reading  receivership  oc¬ 
curred.  Easy  money  led  to  many  con¬ 
solidations  of  transportation  properties 
and  to  very  many  large  commitments. 
Money  tightened.  In  March,  it  loaned 
at  60%  per  annum.  Would  President 
Cleveland  call  an  extra  session  of  Con¬ 
gress  in  March  to  repeal  the  silver  law 
and  to  issue  bonds  in  order  to  replenish 
the  free  gold  in  the  Treasury?  The 


Panics  in  the  United  States.  147 

Stock  Market  showed  a  great  decline  in 
quotations. 

In  April,  1894,  Secretary  of  the  Treas¬ 
ury  Jno.  G.  Carlisle  forbade  the  further 
issuance  of  gold  certificates  for  gold  depos¬ 
ited  in  the  Treasury  under  Act  of  July  12, 
1882,  whenever  the  gold  in  the  Treasury 
“reserved  for  the  redemption  of  United 
States  notes  falls  below  $100,000,000.  ” 
This  further  alarmed  the  business  world, 
which  was  not  reassured  when  on  the  20th 
Carlisle  announced  that  the  Treasury 
would  pay  gold  for  all  Treasury  notes  so 
long  as  he  had  “gold  lawfully  available 
for  that  purpose.”  President  Cleveland, 
that  stalwart  man,  uttered  this  high  and 
firm  pronouncement  on  April  24th:  “The 
President  and  his  Cabinet  are  absolutely 
harmonious  in  the  determination  to  exer¬ 
cise  every  power  conferred  upon  them  to 
maintain  the  public  credit,  to  keep  the 
public  faith,  and  to  preserve  the  parity 
between  gold  and  silver  and  between  all 
financial  obligations  of  the  Government.” 
Very  good,  thought  business,  but  how 
and  when  will  you  act  accordingly? 


148 


A  Brief  History  of 


Lack  of  business  confidence  increased 
greatly.  Money  rates  advanced.  Secu¬ 
rity  values  fell;  imports  greatly  exceeded 
exports.  Silver  certificates  were  at  83. 
Something  was  about  to  snap  in  the 
general  business  machine.  National  Cord¬ 
age  broke  from  57  to  15^  on  May  1st, 
receivers  were  appointed,  and  the  panic 
of  1894  had  declared  itself  and  grew 
worse  on  the  4th  and  5th.  Call  money 
rose  to  40%.  June  witnessed  great  dis¬ 
tress  in  business  circles.  On  the  27th  the 
Government  of  India  stopped  the  coinage 
of  silver  for  individuals  and  decreed  the 
exchange  value  of  the  rupee  at  16  pence. 
This  lowered  the  exchange  value  of  our 
silver  bullion  certificates  to  62 .  President 
Cleveland  helped  matters  somewhat  by 
announcing  that  Congress  would  be  con¬ 
vened  early  in  September.  In  early 
July  the  panic  increased  somewhat  de¬ 
spite  the  President’s  call  for  Congress  to 
assemble  on  August  7th.  Time  loans 
were  hardly  obtainable.  Conditions  in 
August  grew  worse.  Business  was  almost 
at  a  standstill,  and  failures  were  very 


Panics  in  the  United  States .  149 

frequent.  From  August  7th  until  the 
affirmative  action  on  the  28th  by  the 
House  of  Representatives  as  to  the  repeal 
of  the  Silver  Act,  there  was  great  concern. 

Then  hope  revived;  but  hoarding  of 
currency  increased.  Great  banking  inter¬ 
ests  in  New  York  helped  the  situation 
mightily  by  importing  over  $40,000,000 
gold.  September  was  an  anxious  but 
more  hopeful  month  as  the  prompt 
adoption  by  the  Senate  of  the  Free-Silver 
Bill  was  anticipated.  However,  the 
weary  debate  dragged  on  in  the  Senate. 
President  Cleveland  demanded  the  un¬ 
conditional  adoption  of  the  House  meas¬ 
ure.  Certain  compromisers,  led  by 
Senator  Arthur  P.  Gorman  of  Maryland, 
suggested  that  during  each  of  the  follow¬ 
ing  fifteen  months  the  Government  pur¬ 
chase  the  minimum  amount  of  1,000,000 
ounces  of  silver,  and  then  stop  all  such 
purchases  against  which  silver  certificates 
had  to  be  issued.  This  plan  for  speedy 
action  President  Cleveland  and  the 
Secretary  of  the  Treasury  opposed  as 
worthless  unless  concurrently  there  was 


150  A  Brief  History  of 

an  issue  of  $100,000,000  of  Government 
bonds  to  replenish  the  gold  in  the  Treas¬ 
ury.  They  asserted  that  new  legislation 
must  be  had  before  any  such  bonds  could 
be  validated.  So  the  business  world  con¬ 
tinued  to  suffer. 

Let  me  here  state  the  fact,  that  without 
any  fresh  authorization,  Secretary  of  the 
Treasury  Carlisle  did  in  January,  1895, 
issue  $50,000,000  of  Government  bonds 
to  replenish  the  free  gold  in  the  Treasury, 
and  that  an  injunction  suit  against  their 
sale  was  dissolved  by  Judge  Cox  at 
Washington  on  the  30th  of  that  month. 
Gorman  had  been  right.  The  credit  of 
the  country  would  not  have  suffered  by 
the  additional  issuance  of  some  final 
$60,000,000  (?)  of  silver  certificates  if  the 
gold  in  the  Treasury  had  concurrently 
been  upbuilt  to  the  extent  of  $50,000,000 
to  $100,000,000;  but  an  immensity  of 
business  loss  would  have  been  averted. 

But  to  resume  the  orderly  recital  of 
those  times.  October  dragged  along  its 
weary  length,  while  the  Senate  debated 
and  business  withered.  Finally,  on  the 


Panics  in  the  United  States .  151 

30th,  the  Senate  accepted  unconditional 
repeal  of  the  Free-Silver  Act.  On 
November  1st,  it  became  a  law.  The 
fear  of  repudiation  thus  escaped,  though 
with  fearful  loss,  the  country  plunged 
into  all  the  unsettlement  caused  by  a 
too  sudden  and  too  extensive  change  in 
the  tariff.  These  changes  were  an¬ 
nounced  by  the  House  Committee  on 
December  27th. 

The  conditions  mentioned  in  the  last 
paragraph  beginning  on  page  22  of  the 
introduction  to  this  book,  were  at  work. 
Before  the  market  had  recovered  from  the 
“ Silver  panic”  of  1893-4,  the  terror 
caused  to  the  business  world  by  the  pro¬ 
posed  very  decided  changes  in  the  cus¬ 
toms  dues  laid  hold  upon  every  trader  in 
the  United  States  and  reflect edly  upon 
every  one  of  its  citizens.  It  shook  busi¬ 
ness  throughout.  Would  not  such  a 
plan  as  is  set  forth  in  the  footnote  below1 

1  “  Mr.  DeCourcy  W.  Thom  expressed  himself  yesterday  as 
heartily  indorsing  the  Democratic  celebration  to  be  held  in 
this  city  January  17  next,  to  which  all  the  party  leaders  will 
be  invited  and  at  which  subjects  of  interest  to  the  party  will 
be  discussed. 


152 


A  Brief  History  of 


have  virtually  prevented  all  that?  When 
I  sent  that  plan,  which  I  had  stated  in  an 
interview  in  the  Baltimore  Sun  of  Decem¬ 
ber  24,  1910,  to  the  various  members  of 
the  Finance  Committee  of  the  United 

“  When  asked  to  give  his  opinion  on  some  of  the  questions 
worthy  of  discussion  at  this  gathering  Mr.  Thom  mentioned 
the  tariff  and  economy  in  the  conduct  of  national  affairs. 

“  In  the  coming  national  Democratic  celebration,”  he  said, 
“  I  hope  suggestions  dealing  with  a  rational  reformation  of 
the  tariff  and  the  need  for  national  economy  of  every  kind 
will  be  duly  considered,  and  that  on  these  two  subjects  alone, 
to  be  treated  thoroughly  but  temperately,  will  this  national 
Democratic  gathering  advise  our  party  as  to  its  best  course  to 
pursue. 

“  In  three  successive  Presidential  canvasses  since  the  Civil 
War  the  Democratic  party  has  received  a  majority  vote  of  the 
people  of  the  United  States,  and  in  my  opinion  would  have 
gained  three  thereby,  instead  of  the  alternate  two,  elections  to 
the  Presidency  if  the  tariff  issue,  the  major  one  of  the  two 
great  issues — namely,  tariff  and  economy — on  which  they  won, 
had  been  so  sought  to  be  applied  as  not  to  threaten  unduly  to 
affect  general  business.” 

PROTESTS  AGAINST  EXTRAVAGANCE 

“All  will  agree  with  me  that  a  reasonable  economy,  in¬ 
stead  of  the  actual  wild  extravagance  of  government,  is  more 
than  ever  a  national  need.  Who  will  disagree  with  me,  that 
in  addition  to  the  contribution  from  internal  revenue,  the 
tariff  should  be  used  merely  to  contribute  towards  the  due 
expenses  of  the  Government  economically  administered,  but 
so  applied  as  not  to  break  down  the  standard  of  American 
citizenship,  as  exemplified  in  the  working  people  of  our 


Panics  in  the  United  States.  153 


States  Senate  and  to  the  Committee  on 
Ways  and  Means  of  the  House  of  Repre¬ 
sentatives,  very  many  of  them  wrote  me 
affirmatively  on  the  subject. 

To  revert,  however  to  the  due  order 

country;  and  eked  out,  if  it  is  possible,  by  contributions  into 
the  national  treasury  of  sound  inheritance  taxes  ?  ” 

URGES  CUT  ON  NECESSARIES 

“  Is  it  not  possible  to  apply  that  general  plan  as  follows  : 
Divide,  say,  all  of  the  articles  now  upon  the  tariff  list  into 
three  classes. 

“  (a)  All  such  as  are  usually  found  in  the  typical  American 
homes — I  mean  the  homes  of  those  admirably  called  by  Grover 
Cleveland  the  ‘plain  people,’  who  are  just  the  same  class, 

I  believe,  as  those  indicated  by  Abraham  Lincoln,  when  he 
said, *  1  God  must  greatly  love  the  common  people,  for  he 
made  so  many  of  them  ’ — and  put  that  list  of  articles  on  a  free 
list  or  a  severely  tariff-for-revenue-only  list. 

“  (l>)  Create  a  second  division  composed  of  all  the  articles 
of  luxury.  Put  upon  them  the  very  highest  tariff  they  will 
stand  and  yet  come  into  the  country,  except  in  the  case  of 
articles  of  antique  art.  These  latter  should  be  admitted  free. 

“  (r)  Keep  upon  all  other  articles  now  in  the  tariff  list  the 
actual  duties  for  the  period  of  one  year,  but  after  that  period 
and  the  actual  imposition  of  the  proposed  new  tariff  I  am 
discussing  shall  have  begun,  put  all  the  art:cles  involved  in 
Class  c  upon  a  tariff-for-revenue-only  basis,  so  constructed  as 
not  to  break  down  the  standard  of  the  American  workingman’s 
living.” 

YEAR  TO  MARKET  STOCK 

“  This  period  of  one  year — say,  would  allow  manufacturers 
to  market  their  stock  on  hand  or  already  required  to  be  pro- 


154 


A  Brief  History  of 


of  our  tale.  It  was  on  January  17, 
1895,  that  Secretary  of  the  Treasury 
John  G.  Carlisle,  without  any  new  legisla¬ 
tive  authority,  offered  to  sell  $50,000,000 
Government  bonds  already  mentioned. 

duced  on  the  basis  of  the  market  influenced  by  the  quasi- 
Government  protection  extended  by  the  existing  tax  laws  of 
the  nation. 

“  At  the  end  of  this  period  the  manufacturer  would  be 
obliged  to  produce  at  less  cost  in  order  to  find  a  market  in 
competition  with  his  foreign  competitor,  which  competition 
would  result  in  lower  prices  that  he  and  his  foreign  competitors 
would  have  to  offer  to  the  working  people  and  other  citizens 
of  our  country.” 


EFFECT  ON  WAGES 

“  Those  working  people  and  other  citizens  would  for  a  year 
have  been  enjoying  at  lesser  cost  all  of  the  articles  used  in 
the  typical  American  home  I  have  referred  to  and  could  with¬ 
out  loss  therefore  well  afford  to  submit  to  a  reduction  in  wages 
so  long  as  that  reduction  in  wages  was  contemporaneous  with 
affording  them  a  proportionate  or  more  than  proportionate 
reduction  in  cost  of  the  articles  for  whose  purchase  those 
wages  were  sought  to  be  expended.  At  the  same  time,  the 
manufacturer  at  a  proportionately  lesser  cost  of  production, 
through  this  reduction  in  wage-paying,  would  be  selling  as 
much  or  more  of  his  old  products  at  their  old  profit. 

"  Could  we  add  to  the  income  from  the  tariff  and  internal 
revenue  the  sums  derived  from  the  sound  national  inheritance 
tax  1  have  mentioned  above  it  is  evident  we  would  have  sup¬ 
plied  for  the  period  of  change  from  one  tax  system  to  another 
an  ‘adequate  governor’  to  use  a  mechanical  illustration,  to 
prevent  undue  oscillation  of  prices  in  the  business  world.” 


Panics  in  the  United  States.  155 

If  issued  during  the  Silver-repeal  fight 
when  Gorman  proposed  his  compromise, 
and  if  Carlisle  had  made  it  clear  very 
early  that  as  many  such  issues  for  gold 
would  be  made  as  were  needed  to  keep 
the  trading  public  safeguarded  against 
any  monetary-business  cramping  caused 
by  the  governmental  policy  affecting  the 
tariff,  a  minimum  rather  than  something 
approaching  a  maximum  of  disturbance 
would  have  followed.  In  better  spirits 
because  of  the  issuance  of  the  $50,000,000 
Government  bonds  for  gold,  the  business 


BANK  RESOURCES  TO  PREVENT  STRAIN 

“  The  further  use  of  the  existing  financial  agencies  for  co¬ 
operation  of  the  banks  in  all  sections  to  mass  resources  and 
apply  them  to  prevent  undue  local  strain  upon  credit  dispels 
the  fear  of  any  necessary  injury  to  the  financial  fabric  in 
effecting  this  change. 

“  Grover  Cleveland,  whose  character  and  principles  I  have 
long  revered,  seemed  to  me  in.  the  application  of  his  plan  for 
tariff  reform  to  have  endangered  at  once  the  success  and  the 
permanence  of  his  reform  of  the  tariff — which  you  recall  was 
confessedly  and  very  properly  not  a  reformation  to  free  trade — 
by  failing  to  provide  in  it  a  method  for  avoiding  or  at  least 
minimizing  and  shortening  any  incident  disturbance  to  the 
business  world.  1 1  is  plans,  further,  failed  by  not  reasonably 
insuring  for  the  transition  period  from  the  old  tariff  to  the 
new  one  sufficient  national  income  for  national  expenses.” 


156  A  Brief  History  of 

world  worked  along.  The  House  had 
passed  the  Tariff  Bill  early  in  February 
by  a  big  majority.  Business  soon  looked 
up  decidedly.  But  the  Seigniorage  Bill 
was  adopted  in  March.  President  Cleve¬ 
land,  that  sturdy  upholder  of  the  Na¬ 
tion’s  credit,  vetoed  it.  He  knew  that 
any  new  moral  obligation  to  keep  at  a 
parity  with  gold  dollars  worth  in  them¬ 
selves  less  than  one  hundred  cents  in 
gold  would  materially  shake  domestic 
and  foreign  credit. 

The  veto  had  a  deservedly  splendid 
effect  upon  all  our  trading  interests. 
This  was  increased  by  the  failure  of  the 
House  to  override  the  President’s  veto 
of  the  Seigniorage  Bill.  But  the  Senate 
had  not  acted  on  the  Tariff  Bill.  Busi¬ 
ness  dwindled  and  there  occurred  strikes 
and  other  widespread  labor  troubles, 
especially  in  the  bituminous  coal  trade. 
In  many  parts  of  the  country  the  militia, 
and  in  Chicago  United  States  troops,  had 
to  be  employed  to  maintain  order.  Call 
money  was  a  drug  on  the  market.  The 
net  gold  in  the  Treasury  was  very  low. 


Panics  in  the  United  States.  157 

The  Tariff  Bill  dragged  its  weary  length 
along.  President  Cleveland  and  Chair¬ 
man  William  L.  Wilson  of  the  Ways  and 
Means  Committee  of  the  House  insisted 
that  the  bill  would  produce  sufficient 
revenue  for  the  expenses  of  the  Govern¬ 
ment.  Senator  Gorman  and  others  in 
the  United  States  Senate  insisted  to 
the  contrary  and  demanded  that  the 
tariff  on  sugar  should  be  kept  at  a  high 
figure.  A  bitter  controversy  ensued. 
Finally,  on  August  13th,  the  House 
accepted  the  Senate  Tariff  Bill.  It  was 
time  for  some  affirmative  action,  for 
among  other  threatening  conditions  the 
net  gold  in  the  Treasury  had  fallen  to  the 
lowest  figure  since  resumption  of  specie 
payments  in  1879. 

Business  began  to  revive.  The  issue  of 
$50,000,000  Government  bonds  for  gold 
to  replenish  the  Treasury  stock  was  a 
very  stimulating  influence.  The  improve¬ 
ment  dated  virtually  from  the  agreement 
in  February  between  the  Government 
and  the  Morgan-Belmont  Syndicate  to 
prevent  the  export  of  gold.  In  June, 


158  A  Brief  History  of 

1895,  the  Government  gold  was  thus 
brought  up  to  a  round  §100,000,000  for 
the  first  time  since  December,  1894.  But 
notwithstanding  the  fact  that  the  business 
outlook  was  decidedly  better,  the  inevi¬ 
table  disturbances  to  business  following 
a  general  change  in  the  tariff,  unsettled 
political  conditions  in  Europe  and  the 
selling  of  American  securities  owned 
abroad,  the  shortage  of  the  American 
cotton  crop,  President  Cleveland’s  Vene¬ 
zuela  message,  which  many  persons 
thought  might  bring  on  war  with  England, 
and  another  decline  in  the  Treasury 
free  gold,  again  shook  business  con¬ 
fidence. 

Improvement,  however,  was  stimu¬ 
lated  by  a  remarkable  increase  in  the 
supply  of  money  in  our  balance  of  trade 
and  by  the  virtual  settlement  of  the 
Venezuelan  question.  The  business  situa¬ 
tion  was  steadily  clearing.  The  ills  from 
the  panic  of  1893-4  were  well  behind  us. 
The  Spanish -American  war  proved  to 
be  harmless  to  us  financially,  while  it 
tended  to  show  that  National  neighborli- 


Panics  in  the  United  States.  159 

ness  could  be  exercised  in  a  splendidly 
unselfish  way.  By  our  treaty  of  peace 
with  Spain  on  December  10,  1898,  an 
additional  emphasis  was  given  to  the 
revival  of  trade.  During  1899  a  great 
rush  to  speculate  brought  the  pinches 
in  money  inevitable  in  those  pre-Reserve 
Bank  days,  but  could  not  stop  the  general 
broadening  of  business  interests  although 
the  industrial  situation  was  unsatis¬ 
factory  in  spots.  Indeed,  the  succeeding 
year  was  to  witness  severe  industrial 
trouble  destined  to  cause  a  general  set¬ 
back  in  business.  The  situation  cleared 
considerably  when  the  November  elec¬ 
tions  of  1900  showed  the  country  to  be 
safe  from  the  Bryan  silver  policy. 

Big  business  interests  took  hold  of 
market  conditions.  Huge  combinations 
of  trade  interests  became  the  order  of 
the  day.  The  United  States  Steel  trust 
was  the  vastest  and  was  the  transcendent 
achievement  of  J.  Pierpont  Morgan. 
The  Stock  Exchange  was  wild  with  specu¬ 
lation.  The  collapse  came  there  in  the 
famous  decline  of  the  9th  of  May,  1901, 


160  A  Brief  History  of 

precipitated  by  the  Northern  Pacific 
corner.  In  a  month  the  market  was 
tranquil  again.  The  shooting  of  President 
McKinley  produced  great  financial  ner¬ 
vousness.  The  over-trading  abroad, 
especially  in  Germany,  was  influencing 
us  and  all  the  rest  of  the  world,  which 
had  not  yet  recovered  from  the  vast 
financial  cost  of  the  English  Boer  War. 

The  ever  increasing  closeness  of  busi¬ 
ness  relations  the  world  over  —  their 
virtual  solidarity,  in  fact — was  being  il¬ 
lustrated  again  with  us.  A  chief  example 
was  trouble  in  the  copper  groups  follow¬ 
ing  a  slackened  world  demand  for  their 
products. 

Overtrading  was  doing  its  usual  work. 
This  induced  loss  of  business  courage  in 
many  quarters,  or  shall  I  say  a  realization 
that  nowhere  in  the  American  business 
system  was  there  any  arrangement  em¬ 
powered  so  to  marshal  the  competent 
strength  of  financial  America  that  large 
and  overwhelming  disturbances  should 
become  impossible  in  business  generally. 
Indeed,  the  Government  forces  seemed  to 


Panics  in  the  United  States .  161 

tend  contrariwise  to  big  business  prac¬ 
tices.  They  took  virtually  their  first  step 
in  “trust-busting”  when  they  tried  to 
break  up  the  Northern  Securities  Com¬ 
pany,  which  had  been  concocted  to  handle 
the  celebrated  Northern  Pacific  case. 
Labor  troubles  supervened.  Many  great 
speculative  stock  campaigns  collapsed. 
The  banks  yielded  to  the  imperative 
need  to  reduce  credits.  The  year  1902 
had  almost  experienced  a  widespread 
panic:  but  the  marshaling  of  great  private 
resources  had  restored  confidence  tem¬ 
porarily,  and  it  closed  in  peace. 

Panic  of  1903. — Then  came  the  real 
beginning  of  the  protracted  “trust  bust¬ 
ing”  campaign.  Business  took  fright, 
for  it  believed  it  was  to  be  bullied  rather 
than  soundly  regulated.  Great  failures 
on  the  Stock  Exchange  were  its  sure 
indications.  Fear  and  distrust  was  upon 
all  the  American  business  world.  Indus¬ 
tries  languished.  Money  was  easy  be¬ 
cause  less  and  less  employed  in  trade. 
The  great  captains  of  industrial  finance, 
however,  patched  up  troubles  and  differ- 


XI 


A  Brief  History  of 


162 

ences  here  and  there  and,  availing  them¬ 
selves  of  the  plentiful  supply  of  money, 
soon  had  a  notable  speculation  at  work. 
Gradually  the  country  took  heart  again 
and  business  experienced  a  revival. 

It  was  thought  that  President  Roose¬ 
velt,  elected  in  November,  1904,  would 
help  bring  about  discrimination  between 
“good”  trusts  and  “bad”  trusts,  and 
whose  “trust”  is  bad!  But  “trust  bust¬ 
ing”  became  an  even  more  popular  and 
political  pursuit.  Indeed,  the  abuses  prac¬ 
tised  by  many  of  them  had  created  a 
situation  regarding  which  the  question 
was  becoming  in  the  popular  mind  simply 
this,  “Shall  trustdom  rule  the  people  or 
the  people  rule  the  trusts?”  The  sound 
control  of  both  before  the  Constitution 
of  their  country  must  be  the  happy 
solution. 

The  Bill  of  May  9th  of  the  House  of 
Representatives,  giving  the  Interstate 
Commerce  Commission  power  to  fix 
railroad  rates,  was  ominous,  and  little 
noticed  by  the  general  business  world ;  but 
some  noticed  and  acted.  The  Senate 


Panics  in  the  United  States.  163 

had  not  voted;  nor  did  they  realize  what 
rate-regulation  implied  to  railroad  balance 
sheets  and  so  to  the  Stock  Exchange. 
Some  interest  was  selling  securities.  The 
business  public  was  awakening  to  the 
fact  that  legislators,  legislation,  the  people, 
and  the  law  were  hot  after  the  business 
methods  of  many  organizers.  Fear, 
founded  on  a  tardy  awakening  to  facts, 
declared  itself,  but  spasmodically,  for 
now  and  again  the  great  captains  of 
finance  and  industry  were  trying  to  save 
the  situation.  They  successfully  aided 
whatever  of  momentum  there  was  in 
general  business.  But  Congressional  ac¬ 
tivity  as  to  any  combinations  in  restraint 
of  trade  was  unabated.  It  called  upon 
the  President  for  such  information  as  the 
Interstate  Commerce  Commission  might 
have  as  to  a  combination  in  restraint  of 
trade  between  the  Pennsylvania  Railroad 
and  certain  lines  allied  with  it. 

The  battle  between  the  old  style  and 
the  new  style  of  managing  great  corpora¬ 
tions  was  fairly  on.  Labor  troubles 
added  to  the  existing  disarrangement  of 


164 


A  Brief  History  of 


business.  San  Francisco’s  vast  earth¬ 
quake  and  consuming  fire  sucked  much 
capital  away  from  financial  centres  in 
order  to  replace  the  $350,000,000  of 
capital  destroyed.  The  money  market 
was  greatly  restricted.  The  stock  mar¬ 
ket  showed  signs  of  panic.  The  Secretary 
of  the  Treasury  continued  to  help  the 
situation  as  best  he  knew  how.  Notably, 
he  offered  $30,000,000  Panama  Canal 
Bonds,  and  very  successfully  sold  them. 
That  afforded  an  additional  basis  for 
bank-note  issuing.  The  stock  market 
responded  with  a  fine  upward  swing. 
Heavy  dividends  were  declared  by  certain 
leading  railroad  and  other  corporations. 
Indeed  many  high  records  were  made  by 
securities  and  so  distracted  attention 
from  that  steady  tide  of  keener  inspection 
and  stricter  regulation  by  the  agents  of 
the  people  which  was  destined  to  unmoor 
and  toss  and  injure  many  a  financial 
craft.  Railroads  asserted  that  the  coun¬ 
try  needed  a  great  increase  in  railroad 
trackage,  but  that  the  actual  treatment 
of  the  roads  deterred  extensions  through 


Panics  in  the  United  States .  165 

frightening  capital.  So  the  year  1906 
wore  away  after  having  sorely  tried  the 
nerves  of  the  whole  business  world  which 
it  left  in  a  most  justly  apprehensive  state. 

The  Panic  of  1907. — The  panic  of  1907 
opened  with  great  but  feverish  activity 
in  business. .  Driven  by  necessity  the 
railroads  adopted  the  issuance  of  short- 
time  notes  for  new  capital,  as  the  market 
would  absorb  no  long-time  obligations 
except  at  forbidding  interest  rates.  Any 
signally  untoward  happening  could 
promptly  precipitate  a  panic.  The 
United  States  Treasury  withdrawal  of 
Government  deposits  from  the  banks, 
and  the  collapse  of  the  Knickerbocker 
Trust  Company  in  New  York  were  such 
happenings. 

On  March  14th,  the  panic  declared 
itself  and  pandemonium  ruled  on  the 
New  York  Stock  Exchange, — that  prom¬ 
inent  barometer  of  business  conditions. 
In  its  coming  it  had  exemplified  again  the 
characteristic  symptoms  of  a  panic  which 
I  have  set  forth  on  pages  7-16  of  the 
introduction  to  this  book.  After  the 


A  Brief  History  of 


1 66 

spasm  of  March  14th  and  the  business 
cataclysm  of  the  following  October, 
the  business  world  staggered  along,  but 
with  the  strength  merely  that  results  from 
courage  and  the  exercise  of  reserve  power 
husbanding  its  resources  and  lightening 
its  load.  The  decrescendo  movement  of 
another  business  cycle  had  begun. 
Runs  on  financial  institutions  were  prom¬ 
inent  in  our  country.  But  throughout 
all  the  western  world  resources  were 
strained.  Money  had  been  overused. 
Money  rates  were  extremely  high.  Fail¬ 
ures  were  frequent  everywhere.  In  our 
own  country  painful  disturbances,  relax¬ 
ation,  and  unrest  were  everywhere  ap¬ 
parent.  The  radical  doctrines  of  many 
political  leaders  tended  to  further  unrest. 

The  business  of  the  country  was  halting 
between  the  need  sanely  to  regulate 
“big  business”  and  the  fact  that  “big 
business”  had  been  obliged  to  fight  for 
prosperity  in  the  welter  of  unallowable 
but  very  often  undeniable  conditions. 
The  railroads  justly  claimed  that  they 
were  forbidden  living  rates.  Their  oppo- 


Panics  in  the  United  States.  i6j 

nents  accused  them  of  carelessness  and 
waste.  The  railroads  and  the  Inter¬ 
state  Commerce  Commission  were  the 
protagonists  respectively  of  the  conserva¬ 
tive  and  the  radical  thought  of  the 
country,  which  is  so  rich  in  natural  wealth 
and  is  inhabited  by  so  resourceful  a 
people  that  though  by  statutes  they  be 
well  managed  or  not,  their  National 
wealth  increases.  So  ran  the  business 
world  away,  but  with  a  very  slow  and 
steady  approach  towards  a  rational  recti¬ 
fication  of  disputed  legislation  as  affecting 
business.  Meanwhile  the  courageous 
“captains  of  industry”  were  leading  in 
business  as  best  they  could  and  were  better 
appreciating  the  temper  and  needs  of  the 
American  people. 

Added  to  the  difficulties  resulting  from 
our  languishing  trade  at  home,  we  suffered 
reflectedly  from  the  constriction  of  busi¬ 
ness  in  Europe,  which  was  acutely  aware 
that  the  disturbance  in  the  Balkans 
threatened  to  destroy  the  peace  of  Europe. 
Conditions  were  not  yet  quite  ready 
there  for  a  cataclysmic  war.  For  ex- 


A  Brief  History  of 


1 68 

ample,  statistics  had  not  quite  demon¬ 
strated  to  Germany  that  the  physique 
of  her  people  and  the  rate  of  increase  of 
their  families  were  declining  while  the 
expenditures  for  superpreparedness  for 
war  was  demanding  either  retroaction  in 
that  regard  or  else  an  expenditure  from 
the  principal  of  their  property.  Ger¬ 
many  did  make  in  one  year  the  sacrifice 
of  five  per  cent,  of  her  principal  for  yet 
fuller  preparedness  for  war.  Indeed  since 
late  in  1908,  it  is  fair  to  say  that  con¬ 
sciously  or  unconsciously  the  whole  world 
has  been  in  travail.  Whatever  broad 
measures  statesmen  anywhere  have  pro¬ 
mulgated,  have  been  subjected  to  the 
unusual  stress  and  strain  of  world-wide 
unrest.  Like  the  treacherous  undertow 
that  wrenches  those  who  venture  in, 
has  been  the  world  unrest  upon  all 
phases,  incidences,  and  predicates  of  busi¬ 
ness.  Some  of  us  have  long  realized 
this;  some  have  not. 

With  November,  1908,  came  the  elec¬ 
tion  of  that  great  constitutionist,  Taft, 
to  the  American  Presidency  upon  a 


Panics  in  the  United  States .  169 

platform  less  radical  than  that  of  his 
opponent.  This  heartened  'the  con¬ 
structive  forces  of  the  country.  But  very 
little  upbuilding  resulted.  The  coming 
revision  of  the  tariff  was  of  itself  sufficient 
further  to  restrict  business  undertakings, 
and  to  cause  many  great  producers  of 
goods  to  arrange  to  unload  at  lowering 
prices  their  actual  and  their  future  out¬ 
puts.  But  the  conserving  of  resources 
since  the  panic  had  helped  the  superficial 
situation,  and  the  spasmodic  stimulus 
that  so  often  follows  a  general  heighten¬ 
ing  of  the  tariff  showed  itself  after  the 
adoption  of  the  tariff  bill  in  August,  1909. 

The  illness  and  after  a  month  or  two 
the  death  of  the  great  business  leader, 
Harriman,  caused  in  the  securities  market 
a  great  decline.  Fundamental  conditions 
were  unsettled.  The  best  that  could  be 
expected  was  a  see-saw  movement  until 
some  power  should  set  our  country  and 
the  business  world  at  large  once  more 
securely  on  their  respective  bases.  The 
Anti-Trust  Law,  the  Interstate  Commerce 
Law,  and  such  like  influences  continued 


170 


A  Brief  History  of 


to  disturb  the  United  States,  while  Europe 
was  beneath  the  surface  unendingly  agi¬ 
tated. 

General  business  marked  time  while 
statesmen  or  pseudo-statesmen  planned 
and  promised  panaceas.  President  Taft 
joined  that  populous  group.  The  securi¬ 
ties  market,  that  barometer  of  business, 
fell  beneath  such  assurance  of  further 
unsettlement.  How  can  you  continue 
to  trade  unless  reasonably  sure  that  con¬ 
ditions  will  remain  fairly  constant!  All 
this  militated  against  a  normally  quick 
recovery  from  a  great  panic.  Little 
scares  were  frequently  experienced .  Influ¬ 
ences  matured  and  presented  one  great 
political  party  split  into  two  great 
factions,  while  the  other  chief  party 
endured  something  of  the  same  develop¬ 
ment. 

A  conservative  handling  of  National 
policies,  or  a  radical  one  was  the  question 
in  each  case.  The  November  elections 
indicated  a  popular  revolt  against  the 
party  in  power — the  Republican.  Un¬ 
shaken,  President  Taft  followed  his  con- 


Panics  in  the  United  States.  171 

victions  and  in  his  Presidential  message, 
of  December,  1910,  to  Congress  called 
for  a  halt  in  legislating  to  regulate  cor¬ 
porations,  until  the  effect  of  the  laws  on 
the  statute  books  could  be  studied.  The 
stock,  money,  and  industrial  markets 
were  marking  time.  Not  to  go  forward 
in  business  or  elsewhere  is  in  itself  to 
retrograde.  Thus  opened  the  year  1911. 
Under  the  influence  of  easy  money, 
better  business  on  some  of  the  western 
railroads,  better  dividend  declarations 
here  and  there,  a  rosy  prediction  as 
to  the  early  future  of  the  iron  market, 
and  the  belief  that  the  Interstate  Com¬ 
merce  Commission  would  grant  better 
rates  to  the  railroads,  general  business 
felt  encouraged  and  prices  advanced 
somewhat.  But  in  February  the  Inter¬ 
state  Commerce  Commission  forbade  the 
railroads  any  increase  whatever  in  rates. 
The  roads  were  obliged  to  institute  many 
cramping  economies  which  to  them  very 
often  meant  the  using  up  of  their  corpus 
and  to  the  business  world  of  the  United 
States  a  permeating  retrogressive  influ- 


172 


A  Brief  History  of 


ence.  Reductions  in  railroad  dividends 
were  symptomatic  of  that.  To  add  to 
all  this  there  developed  additional  busi¬ 
ness  unrest  predicated  in  the  general  tariff 
change  favored  by  the  House  of  Represen¬ 
tatives  in  April. 

The  United  States  Supreme  Court 
decision  interpreting  the  Sherman  Anti- 
Trust  Law  of  1890  as  affecting  the 
Standard  Oil  Company  case  and  the 
American  Tobacco  Company  case  were 
delivered  late  in  May  and  were  unexpect¬ 
edly  reassuring  to  business.  This  was 
another  evidence  that  the  best  thought 
of  the  Nation  everywhere  was  seeking 
to  rectify  the  looseness  of  the  past  without 
killing  business  initiative  and  continued 
endeavor.  So  matters  see-sawed  in  the 
business  world.  It  was  indeed  in  a  state 
of  unstable  equilibrum.  Stocks  declined 
now  abruptly;  then,  after  some  slight 
recovery,  gently;  but  the  slant  was 
decidedly  downward. 

The  Government  felt  that  its  duty 
required  it  to  push  forward  the  investiga¬ 
tion  of  industrial  corporations;  and  that 


Panics  in  the  United  States .  173 

the  Nation  so  demanded.  And  it  was  in 
October  that  the  chief  of  such  corpora¬ 
tions — the  United  States  Steel  Trust — 
had  a  Government  suit  for  dissolution 
filed  against  it.  The  sturdy  bell-wether 
of  the  corporation  flock  was  attacked  by 
the  great  United  States  Government. 
What  would  happen  to  the  humbler 
members  of  the  flock !  Certain  court 
decisions  were  reassuring  to  corpora¬ 
tions  in  November  and  business  bright¬ 
ened  for  the  time  being  and  during  much 
of  December  in  certain  notable  instances, 
for  in  that  month  the  Interstate  Com¬ 
merce  Commission  report  appeared  and 
seemed  less  drastic  in  tone. 

The  year  1912  opened  with  an  addi¬ 
tional  influence  promising  increased  alarm 
and  marking  of  time.  I  mean  that 
candidates  for  the  Presidential  nomi¬ 
nation  began  their  canvasses,  which,  of 
course,  implied  new  plans  for  making  new 
laws  to  govern  business  conditions.  For¬ 
mer  President  Roosevelt  announced  his 
candidacy  in  February.  President  Taft 
was  already  constructively  in  the  field. 


174 


A  Brief  History  of 


Governor  Harmon  of  Ohio  was  mentioned 
in  many  quarters  as  a  successful  reformer 
who  wished  soundly  to  guide  but  not 
unwittingly  injure  business,  while  Under¬ 
wood  was  similarly  praised  in  addition  to 
his  record  on  the  recasting  of  the  tariff 
into  a  further  revenue  measure.  Champ 
Clark,  Speaker  of  the  House  of  Repre¬ 
sentatives,  was  a  popular  candidate. 
And  Woodrow  Wilson  loomed  up  as 
though  forecast  by  destiny.  At  first 
and  in  many  important  sections  of  the 
country  considerably  more  delegates  to 
the  Republican  National  Presidential  Con¬ 
vention  were  chosen  for  Mr.  Taft  than 
for  Mr.  Roosevelt.  This  and  brisker 
business  served  to  hearten  conservative 
interests,  and  the  general  market  revived 
despite  the  decidedly  downward  influence 
in  our  country  of  the  gigantic  strike 
among  English  coal  operators,  who  there¬ 
by  spread  trouble  throughout  the  British 
Empire,  and,  through  the  solidarity  of 
the  financial  world  to-day,  affected  every 
financial  centre. 

The  remainder  of  the  year  was  domi- 


Panics  in  the  United  States.  175 

nated  by  the  Presidential  canvass.  Taft, 
called  by  many  a  “stand-patter”;  Roose¬ 
velt,  “the  insurgent,”  who  proposed  to 
mend  all  the  troubles  of  the  political 
public  by  his  usual  brusque  methods; 
and  Woodrow  Wilson,  the  “conservative 
with  a  move  on,”  made  their  appeals  for 
popular  support.  Until  the  verdict  in 
November  a  see-saw  market  took  place 
in  the  United  States,  while  Europe  and 
reflectedly  the  remainder  of  the  world 
became  alarmed  lest  the  war  declared  in 
October  by  the  Balkan  States  against  Tur¬ 
key  should  produce  world-wide  trouble. 

The  November  Presidential  election 
showed  that  Woodrow  Wilson  received 
435  votes,  Mr.  Roosevelt  90,  and  Mr. 
Taft  8.  However,  the  popular  vote  for 
Woodrow  Wilson  was  more  than  1 ,000,000 
below  that  cast  for  Messrs.  Roosevelt  and 
Taft  jointly,  and  about  2,000,000  short  of 
a  majority  of  all  the  votes  cast  for  the 
Presidential  nominees — Socialist,  Repub¬ 
lican,  Democratic,  and  so  on.  But  the 
vitally  significant  fact  is  that  the  popular 
vote  for  the  “stand-pat”  candidate — 


176 


A  Brief  History  of 


Mr.  Taft — was  very  small  in  comparison 
with  the  joint  vote  of  the  three  candidates 
whose  platforms  called  for  a  drastic 
handling  of  National  policies, — Debs, 
Roosevelt,  and  Wilson. 

Drastic  recasting  of  the  rules  of  any 
game  unsettles  play .  The  market  dropped . 
But  fortunately  for  the  country  the  ripe 
and  balanced  and  active  intellect  and 
character  of  Woodrow  Wilson,  elected 
President,  lent  much  re-assurance  against 
the  extensive  political  surgery  he  had  been 
chosen  to  perform.  All  knew  that  he 
would  be  thorough  and  reasoning.  All 
the  grievous  handicaps  that  business 
suffers  from  uncertainty  of  regulation, 
it  was  thought  would  be  overcome  as 
promptly  as  possible.  But  the  pledged 
great  change  of  the  tariff  was  enough 
to  induce  retrenchment  of  business  en¬ 
deavor.  With  a  major  factor  unusual 
in  any  proposition,  how  can  stability, 
much  less  progress,  be  expected  in  any 
interest? 

The  Panic  of  1913. — Retrogression  in 
business  began  very  early  in  1913  and 


Panics  in  the  United  States.  177 

increased  until  mid-October,  1914.  On 
October  3,  1913,  the  new  -  Tariff  had 
become  a  law;  but  other  reforms  still 

V 

jostled  business.  However,  by  mid-Octo¬ 
ber,  1914,  the  Interstate  Commerce  Com¬ 
mission  seemed  to  have  become  less 
radical  in  its  views,  the  Industrial  Trade 
Commission  was  at  work  apparently 
studying  the  essentials  of  the  industrial 
situation,  the  United  States  Supreme 
Court  was  delivering  opinions  in  check 
of  indeterminate  statutory  meddling  with 
business  and  the  splendid  potential  of 
the  Reserve  Bank  system  was  offering 
for  use. 

It  is  hard  not  to  overstate  the  vast 
re-assurance  offered  to  business  by  linking 
together  the  banking  power  of  the  country 
through  the  Reserve  Bank  system.  Just 
as  an  enormously  large  number  of  troops 
skilfully  thrown  into  an  endangered — a 
panicky — position  will  ensure  success,  so 
can  the  vast  resources  of  the  Reserve 
Bank  system  restore  financial  order  when 
panic  fear  is  declaring  itself.  During 
the  past  two  years  of  threatening  from 

xa 


1 78 


A  Brief  History  of 


the  disturbances  in  Mexico,  our  country 
has  learned  to  forecast  the  benefit  that 
the  Reserve  Bank  system  predicates; 
but  our  stay  and  confidence  has  been  the 
cool  and  far-seeing  statesmanship  of  our 
great  President,  Woodrow  Wilson. 

The  breaking  out  of  the  “World  War” 
in  August,  1914,  had  so  flooded  our  market 
with  securities  held  in  Europe  that  the 
Stock  Exchange,  following  the  conti¬ 
nental  example,  closed  from  July  31st 
till  November  28th,  when  the  New  York 
Stock  Exchange  and  other  American 
stock  exchanges  opened  for  restricted 
business  in  bonds  and  on  December  15th 
to  unlimited  trading  in  stocks  and  bonds. 
Other  kinds  of  exchanges  acted  much  the 
same.  This  checked  business  in  every 
direction,  despite  the  great  issuance  of 
temporary  Clearing  House  certificates. 
In  two  months  the  latter  tendency  was 
changed  in  many  quarters. 

Then  began  the  “war  boom.”  Gradu¬ 
ally  it  has  spread,  bringing  such  enormous 
profits  in  all  our  lines  of  business  supply¬ 
ing  the  needs  of  the  “Great  War,”  that 


Panics  in  the  United  States .  179 

the  first  twelve  months  of  it  showed  more 
than  a  billion  dollars  trade  balance  in  our 
favor,  and  that  balance  then  began 
increasing  on  a  progressive  scale.  Money 
is  yet  plentiful.  All  business  is  stimu¬ 
lated.  Our  crops  are  unexampled  in 
quantity  and  money  value.  Everything 
points  to  great  prosperity  unchecked 
until  the  “ Great  War”  ceases  and  with¬ 
draws  the  stimulating  demand  for  our 
supplies. 

Then  will  come  a  readjustment  of  our 
trade.  Money  will  have  become  actually 
or  potentially  scarce  because  of  the 
previous  vast  expansion  of  our  business, 
and  all  the  banking  power  of  our  country 
will  be  requisite  to  prevent  a  crashing 
panic.  The  Reserve  Banks  will  have 
gotten  fully  to  work  by  then,  it  is  to  be 
hoped.  They  will  be  needed  to  lead  in  the 
life-saving  operations.  Such  first  aid  to 
the  injured  will  obviate  such  financial 
sufferings  as  the  old-time  panics  pre¬ 
sented.  They  can  hardly  be  expected 
to  reduce  the  casualties  to  the  volume 
of  the  slow  panic  in  securities  in  the 


180  A  Brief  History  of 

year  1913,  for  the  volume  of  business 
involved  at  present  is  vastly  more  swollen 
and  the  kind  more  circumscribed. 

It  is  interesting  to  note  that  panics 
have  continued  to  appear  about  as  regu¬ 
larly  as  usual,  but  less  crushingly,  since 
1890,  the  date  up  to  which  the  first  and 
second  editions  of  this  book  had  traced 
them.  Remedial  or  partially  preventive 
measures  have  been  more  and  more 
utilized  by  the  financial  powers  to  control 
them.  Never  will  panics  cease  so  long 
as  trade  and  fear  are  exemplified  on  this 
earth,  but  just  as  modern  medicine  is 
overcoming  the  dangers  threatening  the 
physical  man,  so  is  modern  finance 
overcoming  panic  and  the  other  dangers 
which  threaten  financial  stability.  After 
all,  reserve  power  and  only  a  rational  use 
of  financial  resources  are  the  surest 
preventive  of  panic.  And  that  the  Ameri¬ 
can  people  have  not  been  forced  through 
entrance  into  the  “World  War”  to  deplete 
their  reserve  strength,  especially  in  a 
financial  way,  is  due  to  the  splendid 
conduct  of  our  great  President.  He  is 


Panics  in  the  United  States.  181 

leading  this  country  to  unexampled  pros¬ 
perity.  Instead  of  consenting  that  old 
abuses  in  the  business  world  should 
continue  until  an  over-indignant  public 
had  grown  riotously  injurious,  he  has 
guided  the  current  of  their  wrath,  initiated 
or  promulgated  the  methods  for  redress¬ 
ing  their  grievances,  and  has  saved  to  the 
country,  to  its  people,  and  to  general 
business  itself,  the  splendid  and  full 
service  of  business  enterprise  freed  from 
the  abuses  and  handicaps  that  unregu¬ 
lated  conditions  had  forced  it  to  employ 
in  the  unrestrained  struggles  of  the  open 
mart. 


DeCourcy  W.  Thom. 


1  ; 


INDEX 


Adams,  President,  63 

Agriculturists,  how  affected  by  protective  tariffs,  5,  6,  11; 

how  affected  by  low  tariffs,  10,  12 
Alabama  indemnity,  99 

American  Tobacco  Co.  case,  effect  of  decision  on,  172 

Balkan  States  trouble,  causes  alarm,  167,  175 
Baltimore  Sun,  December  24,  1910,  interview  with  Mr. 
Thom  on  the  tariff,  151  seq. 

Bank  of  England,  extends  help  to  America,  in  1839,  73; 

suspension  of,  in  1796,  88;  averts  panic  in  1890,  140 
Bank  of  France,  suspension  of,  in  1848,  and  1871,  89 
Bank  of  Lancaster,  29,  30 
Bank  of  New  York,  surplus  of,  57 

Bank  of  North  America,  formation  of,  26;  embarrassment 
of,  27 

Bank  of  Pennsylvania,  charter  obtained,  6 1 
Bank  of  Philadelphia,  33 

Bank  of  the  United  States,  formation  of,  28;  reduces  dis¬ 
counts  and  circulation,  36;  re-establishment  of,  39;  terms 
and  conditions  of  charter  of,  40  seq . ;  examination  of,  by 
Congressional  Committee,  49;  violation  of  charter  of,  49; 
insolvency  of,  59;  withdrawal  of  Government  deposits 
from,  60;  action  of,  in  panic  of  1838-39,  67;  aids  South¬ 
ern  banks,  70;  liquidation  of,  in  1839,  75;  renewal  of 
struggle  with  United  States  Government,  77;  endeavor 
to  force  Government  into  bankruptcy,  77,  78;  opinion 
of  Buchanan  concerning,  79 
Bankruptcies,  in  England  in  1839,  75,  76 
Bankruptcy,  endeavor  of  United  States  Bank  to  force  the 
Government  into,  77,  78 

Banks,  advances  beyond  resources  as  cause  of  panic,  36; 
new,  1811-1815,  36-37;  embarrassment  of  local,  1828- 
29,  54 

Baring  Brothers,  failure  of,  5,  140,  141 
Barker  Brothers,  failure  of,  140 

Biddle,  Mr.,  President  of  the  U.  S.  Stock  Bank,  on  crisis 
of  1825  in  England,  54;  obtains  charter  of  Bank  of 
Pennsylvania,  61;  on  action  of  Bank  of  U.  S.,  67,  68; 

183 


184 


Index. 


Biddle,  Mr. —  Continued 

establishes  new  banks  in  the  South,  69;  utilizes  National 
credit  for  benefit  of  the  States,  71;  establishes  new  bank 
in  New  York,  72;  defends  his  actions,  74 
Bland,  Mr.,  Maryland  representative,  37 
Buchanan,  President,  opinion  concerning  United  States 
Bank,  79;  on  panic  of  1857,  90 
Buenos  Ayres  crisis,  139 
Business  conditions,  1888-92,  135  seq. 

Capital,  panics  of,  4 
Carey,  Mr.,  38 

Carlisle,  John  G.,  Secretary  of  the  Treasury,  forbids 
issuance  of  gold  certificates,  1894,  147;  issues  Govern¬ 
ment  bonds,  1895,  150,  154 
Causes  of  panics,  3  seq.,  7,  21,  32  seq.,  35,  52 
Clark,  Champ,  174 
Clarke,  Mr.,  effect  of  death  of,  100 

Cleveland,  Grover,  President,  pronouncement  of  April  24, 
,  1894,  147;  calls  Congress  in  August,  1894,  148;  and  Free- 

Silver  Bill,  149;  effect  of  his  tariff  reform  plans,  154;  on 
Tariff  Bill,  157 

Circulation,  panics  of,  3;  of  paper  money,  effects  of,  34; 

of  country  banks  in  1814,  36 
Commerce,  “golden  age”  of,  38 
Commercial  and  Financial  Chronicle,  135 
“Compromise  Tariff,”  9 

Congress,  issues  paper  money,  25,  26;  votes  to  extend 
charter  of  Bank  of  United  States,  59 
Cooke,  Jay,  failure  of,  94 
Cotton,  monopoly  in,  69;  overproduction  of,  72 
Cox,  Judge,  150 

Credit,  panics  of,  4;  extension  of,  by  artificial  demand,  33; 

of  the  United  States  in  Europe,  immensity  of,  70  seq. 
Crisis  of  1814,  attributed  by  committee  of  Senate  to  the 
abuse  of  the  banking  system,  36 
Crisis  or  panic,  definition  of,  2,  3 

Debs,  176 

Decennial  Panic,  5 

Decker,  Howell  &  Co.,  failure  of,  140 

Deposits,  relation  to  business,  19 

Discounts,  and  loans,  relation  to  deposits,  13  seq.;  resulting 
from  increased  issue  of  bank  notes,  33 


Index. 


185 


Donnel,  Lawson  &  Simpson,  failure  of,  107 
Duane,  Mr.,  60 

Economic  history  of  United  States,  sketch  of,  5 
Embargo  of  1808,  7 

England,  large  number  of  bankruptcies  in  1839,  75,  76 
English  coal  operators,  strike  of,  1 74 
English  export  houses,  losses  of,  67 
Eno,  John  C.,  103 

Expenses  of  War  of  1812  defrayed  by  notes  issued  by  banks, 

37 

Extravagance  of  Government,  protests  against,  152 

Failures,  total  number  of,  during  panic  of  1838-39,  80; 

in  1857,  88;  in  1883,  105 
“Farmers'  Bank,"  29,  30 
Fish,  Mr.,  President  of  the  Marine  Bank,  103 
Fiske  &  Hatch,  failure  of,  95,  107 
France,  table  of  panics  of,  19 
Free-Coinage  Bill,  sec  Free-Silver  Bill 
Free-Silver  Act  repealed,  15 1 

Free-Silver  Bill,  distrust  caused  by,  141;  passed  by  Senate, 
145;  passed  by  House,  149 

Gallaudet  &  Co.,  P.,  failure  of,  140 
“Gentleman's  Agreement,"  139 

German  Government,  invests  in  public  securities,  1873,  99 
Gold  rises  to  per  cent,  in  1873,  100;  export  of,  1893- 

94,  146;  imported,  1894,  149;  export  of,  prevented,  157 
Gorman,  Arthur  P.,  Senator  from  Maryland,  on  Silver 
question,  149,  155 

Government  bonds  issued,  1895,  157 
Grant,  General  U.  S.,  103 
Grant  &  Ward,  103;  failure  of,  106 
Gregory  &  Ballou,  failure  of,  140 
Grinnell,  George  Bird,  failure  of,  100 

Hamilton,  Alexander,  proposes  a  national  bank,  27,  35 

Harmon,  Governor  of  Ohio,  1 74 

Harriman,  effect  of  death  of,  169 

Hatch  &  Foote,  failure  of,  107 

Hope,  Mr.,  of  Amsterdam,  73 

Hottinguer  et  Cie .,  73 

House  of  Representatives,  report  of  committee  of,  on 
panic  of  1818,  50 


i86 


Index. 


Imports,  great  excess  over  exports  in  1836,  66 
Industrial  corporations,  Government  investigation  of,  1 72 
seq. 

Industrial  Trade  Commission,  177 
Interest,  laws  of  New  England  relating  to,  32 
Interstate  Commerce  Commission  and  railroads,  162,  167, 
171,  1 77 

Interstate  Commerce  Law,  influence  of,  169 

Jackson,  President,  66;  on  conduct  of  Bank  of  United 
States,  58;  refuses  to  ratify  extension  of  charter  of  Bank 
of  United  States,  60;  on  interest  money,  76 
Juglar,  M.,  2;  analysis  of  business  life,  23 

Knickerbocker  Trust  Co.,  collapse  of,  165 

Labor  troubles  in  1895,  156;  in  1903,  163 
Lidderdale,  William,  Governor  of  the  Bank  of  England,  141 
London  Times ,  attack  on  United  States  Bank,  74;  defense 
of  Mr.  Biddle,  74 

McKinley,  President,  financial  effect  of  the  shooting  of, 
160 

McKinley  Bill,  8,  11 

Marine  Bank,  suspension  of,  103,  116 

Maryland  banks,  suspension  of,  85 

Mechanics’  Banking  Association,  suspension  of,  85 

Metallic  reserves,  fluctuations,  132 

Metropolitan  Bank,  103,  104,  109,  117 

Mills,  Roberson  &  Smith,  140 

Morgan,  J.  Pierpont,  159 

Morris,  Mr.,  26 

National  bank,  consideration  of,  34;  antagonism  to 
establishment  of,  35 

National  Bank  of  the  Commonwealth,  failure  of,  95 
National  banks  of  the  United  States,  tables  of,  17,  18; 

survey  of  balance  sheets,  124,  127 
National  finances,  administration  of,  withdrawn  from 
United  States  Bank,  78 
National  loans  in  1814,  35 
National  prosperity  in  spite  of  panics,  63 
National  revenue,  effect  of  increase  in  1836,  64 
National  Trust  Co.,  failure  of,  95 
New  England,  laws  of,  relating  to  interest,  32 


Index. 


187 


N.  Y.  &  N.  E.  Railroad  Co.,  receiver  appointed  for,  106 
New  York,  establishment  of  bank  in,  to  avert  panic  in 
1839,  72,  73;  banks  of,  relation  of  metallic  reserve  to 
deposits,  1854-57,  87;  failures  of,  115 
New  York  Clearing  House,  action  of,  in  1873,  96;  action  of, 
during  panic  of  1884,  108,  109 
New  York  Stock  Exchange,  suspension  of  business  in  1873, 
95;  collapse  in  1901,  159;  failures  in  1903,  161;  panic  in 
1907,  165;  suspended  business  in  1914,  178 
Non-Intercourse  Act  of  1809,  7 
North  America,  Bank  of,  26 
North  River  Bank,  failure  of,  140 
North  River  Co.,  receiver  appointed  for,  106 

“Ohio  Life,”  collapse  of,  84 
Overend,  Gurney  &  Co.,  failure  of,  4 

Panama  Canal  Bonds,  164 

Panic,  or  crisis,  definition,  2,  3;  causes,  3  seq.,  7,  32  seq.,  35, 
52;  classes  of,  in  United  States,  3,  4;  symptoms  of  ap¬ 
proaching,  7  seq.;  of  1814,  7,  32  seq.,  165;  of  1818,  8,  47 
seq.;  table  of  panics  in  France,  England,  and  United 
States,  20-21;  of  1825,  26,  53;  of  1831,  56;  of  1837-36, 
58;  of  1838-39,  action  of  Bank  of  United  States,  67; 
outbreak  of  the  crisis,  74  seq.;  of  liquidation  of  the  Bank 
of  the  United  States,  75;  of  pressure  of  the  English 
market,  75;  of  renewal  of  struggle  between  Bank  of  the 
United  States  and  the  Government,  77;  failures,  80;  of 
1848,  80;  of  1857,  ii,  82;  condition  of  New  York  banks, 
1852-57,  87,  91;  of  1864,  not  strictly  a  financial  crisis, 
93;  of  1873,  23,  93;  of  1884,  101-119;  compared  with 
crisis  of  1873,  113;  unforeseen,  no  seq.;  succession  of 
crises  in  United  States  studied, through  balances  of  banks 
1 19  seq.;  of  1890,  138;  of  1893-94,  145;  of  1903,  161;  of 
1907,  165;  of  1913,  176;  periodical  occurrence,  180; 
preventives  of,  180 

Paper  money,  issued  by  English  Colonies,  25;  issued  by 
Massachusetts,  25;  issued  by  Congress,  25-26;  illusions 
concerning,  28-29;  depreciation  of,  29;  used  to  replace 
coin,  33;  effects  of  circulation,  34;  excessive  issue  of,  48; 
considered  as  cause  of  panic,  62 ;  small  notes  issued,  63 
Pennsylvania,  Legislature  forbids  issuing  notes,  29;  act 
of  1812  authorizing  banks,  31;  unratified,  31;  starting 
of  banks  in  1813,  3 1 ;  re-establishing  banks  which  had 
failed,  53 


i88 


Index . 


Pennsylvania  banks,  table  of  increase  and  decrease  in 
circulation  of,  footnote,  36;  suspension  of,  85;  re-estab¬ 
lished  in  1824,  53 

Pennsylvania  Senate  Committee,  report  on  prevention  of 
bad  administration  of  banks,  1820,  51  seq. 

Presidential  nominations,  1912,  influence  of,  173 
Prices,  relation  to  panics,  12  seq. 

Prosperity  signs  of,  16,  23-24;  in  United  States,  83 
Protective  tariffs,  effect  of,  5 

Public  securities,  German  Government  invests  in,  99 

Railroads,  loans  for  building,  one  of  chief  causes  of  panic 
in  1873,  94;  rates,  162,  171 
Randall  &  Wierum,  failure  of,  140 
Reserve  Bank  system,  177  seq. 

Richmond,  David,  failure  of,  140 
Roberson  &  Smith,  failure  of,  140 
Roosevelt,  President,  173,  175;  and  trusts,  162 
Rothschild,  Baron,  73,  74 

Savings  banks  of  New  York,  failure  of,  107 
Second  National  Bank,  treatment  of,  by  John  C.  Eno, 
104-5;  suspension  of,  106 
Seigniorage  Bill,  156 

Senatorial  Committee  of,  inquiry  on  panic  of  1818,  report 
of,  50 

Sherman  Anti-Trust  Law  of  1891,  169,  172 
“Silver  Panic”  of  1893-94,  151 
Spanish-American  War,  financial  effect  of,  158 
Specie,  r61e  of,  133-94 
Specie  payments,  suspended,  38 
Sprague,  Claflin  &  Co.,  suspension  of,  95 
Standard  Oil  Co.  case,  effect  of  decision  on,  172 
State  Banks,  reduced  circulation  of  banknotes,  47-8 
State  debts,  76 

Symptoms  of  approaching  panics,  7  seq. 

Taft,  William  Howard,  President,  effect  of  his  election  in 
1908,  168,  170,  1 7 1 ;  presidential  candidate  in  1912,  173, 
W5 

Tariff,  changes  of,  as  cause  of  panic,  4  seq.,  10,  12,  21  seq.; 
of  1846,  4,  9;  effect  of  protective,  5;  inter-relations  of  and 
agriculture,  5  seq.;  effects  of  new,  5,  22;  and  economy, 
Mr.  Thom  on,  1910,  152-55;  on  necessaries  and  luxu¬ 
ries,  153;  effect  on  wages,  154;  of  1913,  177 


Index. 


Tariff  Bill,  1895,  156 

“Trust-busting,"  16 1,  162 

1 

Union  Trust  Company,  failure  of,  95 

United  States,  classes  of  panics  of,  3  seq.;  immense  credit  of, 
in  Europe,  70  seq.;  withdraws  deposits  from  banks,  60 

United  States  Steel  Trust,  159;  Government  suit  against, 

173 

United  States  Treasury,  purchase  of  national  securities 
by,  in  1873,  99;  withdraws  Government  deposits  from 
banks,  60,  165;  bonds  issued  in  1812,  1813,  and  1814,  37, 
issued  in  1895,  150 

Van  Buren,  President,  opinion  on  paper  money,  62 

Vanderbilt,  speculator,  100 

Venezuelan  question,  effect  of  its  settlement  upon  business, 
158 

Walcott  &  Co.,  J.  C.,  failure  of,  140 

War  of  1812,  money  to  carry  on  war,  obtained  from  banks, 

37 

Ward,  Ferdinand,  103 

Wheat-flour,  tables  of  export,  13  seq. 

Whitney  &  Co.,  Charles  M.,  failure  of,  140 

Wilson,  Woodrow,  presidential  candidate,  1912,  174; 
election,  175;  effect  of  election,  176  seq.;  leadership,  178, 
180,  181 

“ World  War,"  first  a  check  and  then  a  boom  to  business, 

178 


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